Pension Contribution Relief – Use It Or Lose It

Expat retirement savers sitting piles of cash should take notice of Chancellor George Osborne’s early warning that he intends to slash the amount of money they can stash into a pension from next April.

Osborne says the annual pension allowance will fall from £40,000 of contributions a year to £30,000.

But savers who want to make the most of their pensions may not be aware that they can contribute up to three years unused allowances.

As the annual allowance was £50,000 in two of the past three years, expat retirement savers have £140,000 of pension contributions to play with.

If they made contributions to a pension, the amount available to pay in before April 5, 2015 is £140,000 less any contributions already made over the past three years.

If they have no pension, then the full allowance is available.

Tax relief on pension contributions

The bonus is every £80 paid into a pension by a basic rate taxpayer is worth £100 when topped up with tax relief by the government.  This is even more for 40% and 45% taxpayers.

From April 6, 2015, the three-year contribution limit lowers by £20,000 to £120,000.

The Association of Certified Chartered Accountants (ACCA) is warning that this is a use-it or lose-it relief for cash rich taxpayers.

Chas Roy-Chowdhury, ACCA head of taxation, said: “This may sound like a lot of money to pay into a pension, but it’s not a lot for many directors running profitable companies who may be considering taking the cash as dividends but have worries about the tax consequences.

“We are disappointed the Chancellor is urging people to save more for retirement, but at the same time is reducing the amount they can put into a pension.

Checking your entitlement

“We would advise anyone who has unused allowances and spare cash to make use of this window.”

Roy-Chowdhury explained the allowance is available across multiple pensions and includes workplace contributions made by employers.

Retirement savers who want to find out what unused allowances they may have can contact their pension providers for a statement of contributions for each financial year, he added.

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