How pension tax relief works

Important information - please keep in mind that the value of investments can go down as well as up so you may get back less than you invest. Tax treatment depends of individual circumstances and all tax rules may change in the future. You cannot normally access money in a SIPP until age 55 (57 from 2028).

Pension tax relief is intended to help you save for retirement with money that would otherwise have gone to the tax man. This doesn’t mean you won’t have to pay tax on that money in the future, simply that you don’t have to pay tax on it now.

For example, a £1 contribution today costs you 80p if you’re a basic-rate taxpayer, as little as 60p if you’re a higher-rate taxpayer and 55p if you pay additional-rate tax. Exactly how it works will depend on the way your pension scheme operates its tax relief. Rates of tax relief for Scottish Residents may differ to the rest of the UK.

You’ll only get tax relief on contributions up to the amount you’ve earned in any given tax year. The amount of pension tax relief also depends on what rate of income tax you pay and the pension allowances you have available. You won’t get tax relief on any contributions made by an employer including any paid via a salary sacrifice arrangement.

Important information - this information is not a personal recommendation for any particular product, service or course of action. If you are in any doubt whether or not a pension transfer is suitable for your circumstances we strongly recommend that you seek advice from one of Fidelity’s advisers or an authorised financial adviser of your choice.