Benefits of topping up your individual pension
As you fund an individual pension yourself, the more you pay in, the more potential there is for you to achieve the retirement you want. You could also get tax relief on the additional contributions so it is worth considering topping up your pension.
What difference could it make?
For example, if you are a basic rate taxpayer and you paid in £80 per month to your personal pension, the taxman would add another £20 in tax relief. Over 20 years this would add up to a total pension contribution of £24,000. Broken down, 20 years equals 240 months. So, 240 x £80 = £19,200 in pension contributions and 240 x £20 = £4,800 in tax relief.
And if you earn above the basic rate of tax, you can also claim additional tax relief through your tax self-assessment form. You can also do this online.
Plus you could make an even bigger difference to your pension pot by topping up your contributions, although tax relief is subject to government limits.
If you are a Scottish Rate tax payer, your Personal Allowance is the same as the rest of the UK as well as your rate of income tax. However, the amount you can earn before paying higher rate tax will be £31,500 (totalling £43,000 which includes the £11,500 personal allowance).
For more details on the Scottish Rate of Income Tax, please visit the https://www.gov.uk/scottish-rate-income-tax
Topping up your pension could boost your income in retirement.
Please remember that the value of your pension fund could go down as well as up and so you may not get back what you put in.
Topping up - the earlier the better
Topping up your pension could boost your income in retirement. But the earlier you start, the more potential your fund has to grow.
And if you opt for an automatic premium increase (API), by adding an extra 5% to your premium every year for instance, your fund could have even more potential to grow.
This is for illustration only and is based on our current understanding of current tax legislation and HM Revenue & Customs practice, both of which may change without notice. The impact of taxation (and any tax relief) depends on individual circumstances.