Pensions and retirement planning

This is the main benefit of paying into a pension. If you pay money into a pension, or if it is taken by your employer from your pay, you automatically get 20% tax back from HMRC as an additional deposit into your pension pot.

And if you're a higher-rate taxpayer you can claim an additional 20%, while top-rate taxpayers can claim an additional 25%.

You can put in up to 100% of what you earn or £60,000 a year, whichever is lower. This is known as your 'annual allowance'. If the contributions are solely from your employer, the limit is simply £60,000 per year. Unused allowances from the previous three years can also be utilised if required.

High earners, over £260,000 per year, will have a reduced annual allowance.

When you are ready to retire, tax-free cash is available at 25% of your personal pension, up to a maximum of £268,275. You can draw benefits from a pension from age 55, which will increase to 57 in 2028.

Different rules may apply if you have a Defined Benefit ‘Final Salary’ pension and you should speak to one of our specialist advisors for assistance on these.

Pension freedoms introduced in 2015 mean that anyone who's aged 55 or over can take their pension money however they want, whenever they want. Taking 100% of your pension in one withdrawal is rarely the right thing to do.

Broadly, you will need to decide if you want to a) leave it invested for when you need it, b) take 25% tax-free cash, then do ‘income drawdown’ on the rest, or c) take 25% tax-free cash, then buy any annuity.