How to pay a lump sum into a pension

Whether you’ve just received a bonus or are approaching retirement, there are many reasons for paying a lump sum into your pension. Going above and beyond your regular pension contributions can get you closer to achieving your retirement savings goals, plus it can prove a tax-efficient way to save.

When can I put a lump sum into my pension?

You can pay money into your pension at any point in your life, and there’s no upper limit on how much you can pay in. In fact, the sooner you can invest your lump sum the more time it will have to grow, potentially giving you more in retirement.

You’ll receive pension tax relief on pension contributions up to 100% of your salary, up to an annual threshold of £40,000. If you go over this amount you won’t receive tax relief on those contributions and will be charged tax at the highest rate you pay.

For this reason it’s a good idea to keep track of your pension contribution levels throughout the year. If you’ve saved less than the annual threshold, the end of the financial year is a good time to make a lump sum pension contribution. You’ll maximise your tax relief for that year before your balance resets in April.

If you meet certain criteria you may be allowed to carry forward three years of unused allowances from qualifying pensions. Where applicable, you could benefit from tax relief on further contributions of up to £120,000 on top of your current year.

Your pension contributions attract 25% tax top ups. Higher rate taxpayers can claim a further 20% and top rate taxpayers an additional 25%. If you’re a basic rate taxpayer and have £4,000 to invest in your pension as a lump sum, the government will add £1,000 in tax relief, provided you’re below the threshold.

Reach your retirement goals, faster

If you come into extra money, one of the best places to invest a lump sum is into a pension. Whatever your plans for retirement, paying a lump sum into your pension is a great way to help you get there.

When you choose a pension plan from PensionBee we’ll make pension saving as simple as possible. PensionBee can help you claim tax relief on your pension contributions by liaising with HMRC on your behalf, and updating your account at the end of each month. You can view your balance, track your tax relief and make lump sum payments through our easy-to-use online dashboard. Start saving with PensionBee today.

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.

Last edited: 07-02-2018

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