There’s no limit to the number of pensions you can have. However, there are annual and lifetime limits on the amount you can pay into your pensions while claiming tax relief; £40,000 and £1,073,100, respectively (for the 2020/21 tax year). These limits may vary based on your circumstances.
How many personal pensions can you have?
A personal pension is a type of pension you can set up yourself, and is common amongst the self-employed. Personal pensions include the Self Invested Personal Pension (SIPP).
There’s no limit to the number of personal pensions you can set up, and you can pay into more than one personal pension at a time.
How many workplace pensions can you have?
A workplace pension is a type of pension set up by your employer. Since employers have been required to automatically enrol their employees into a workplace pension from 2018, the number of workplace pensions people are picking up during their working careers is increasing.
You can belong to more than one employer’s workplace pension scheme. If you work more than one job, each of your employers will have to check whether you’re eligible to join their workplace pension scheme. If you’re eligible, you’ll be enrolled into a workplace pension with them. You can opt out of your workplace pension scheme, and request to opt in if you weren’t automatically enrolled.
How many stakeholder pensions can you have?
A stakeholder pension is a type of pension that can be set up by anyone, for themselves or others. It was introduced primarily for those who may not meet the criteria of other pension schemes, such as those on low incomes and the self-employed.
There’s no limit to the number of stakeholder pensions you can have, and you can pay into more than one stakeholder pension at a time.
How much can you pay into a pension while receiving tax relief?
So long as you’re an eligible tax payer, the government will grant tax relief on pension contributions. This can work as a tax refund or a tax top-up, depending on how you make your contributions. In either case, the government effectively contributes extra towards your pension. But they’ll only do so up to a certain point, so it’s best to keep this in mind.
Annual pension allowance
The annual pension allowance is the maximum amount you can pay into a pension each year while claiming tax relief. For the tax year 2020/21, you can pay in up to £40,000 or 100% of your salary (whichever is lower). It applies to all types of pension.
However, this limit changes if you have a low salary or have already started drawing down from your pension.
To learn more about the annual pension allowance, read How much can I pay into a pension each year?
Lifetime pension allowance
The lifetime pension allowance is the maximum amount you can receive from a pension without having to pay a tax penalty. Therefore, it’s not advised to pay more than that amount into a pension during your lifetime.
For the tax year 2020/21, the lifetime pension allowance is £1,073,100. It applies to all forms of pension.
What are the downsides of having more than one pension?
If you have more than one job during your lifetime, it’s almost inevitable that you’ll have more than one pension due to new auto-enrollment rules. But while it may feel like having lots of pensions is a good thing, there are significant downsides:
- You may end up paying more in fees than you should, since fees can range wildly between providers.
- Every pension plan has a different investment strategy, so having multiple pensions could dilute the overall effectiveness of each pension.
- Managing and tracking the performance of multiple pensions is inefficient and time consuming, and you may lose track of older pensions as time goes on.
Should you combine multiple pensions into one?
It’s simpler to manage one pension, fees are more transparent, and you’ll be able to choose a pension plan that’s most suited for your goals. However, you’ll first want to check your existing pensions to see if you’d lose any benefits if you transferred them to another provider.
PensionBee allows you to combine your old pensions into one simple and effective plan. You’ll be able to easily manage your pension through the secure app, and our single annual fee keeps costs simple. It’s also free to make withdrawals, unless you drawdown everything within 12 months in which case a full withdrawal fee of £150 will apply.
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.
