Pension tax relief is essentially free money that the government offers you as an incentive to encourage you to save for retirement. You contribute a set amount to your pension and the government tops up your nest egg with the same amount you would have paid in tax on your earnings.

How much free money the government will give you depends on how much you earn, how much tax you pay, and how much you contribute to your pensions.

There is a cap on it, though. If you’re paying income tax, in this tax year (2023/24) you can usually only get pension tax relief on contributions up to £60,000 (annual allowance) or the equivalent of your total earnings if they are less than £60,000 p/a.

If you earn more than £60,000 p/a, you may be able to contribute over this amount before charges apply, depending on whether you are able to carry forward any unused pension annual allowances up to the 3 previous tax years.

You can find out more about how tax relief works in our blog article "What is pension tax relief".