You get tax relief on your pension contributions, up to a limit. There are caps on the amount of tax-free pension savings you can build up in the scheme. If you go over the limit, you could face a tax penalty on the excess.
Your E.ON UK benefit statement tells you more about your personal tax allowances.
Annual Allowance
The Annual Allowance is the total you can pay into all your pension arrangements each tax year before you are liable for tax. The limit is currently set at £60,000 per year.
If your annual pension savings go over this limit, you may have to pay a penalty charge – unless you have unused Annual Allowance from the previous three years that you can carry over. Learn more about the Annual Allowance.
Some higher earners may have a lower allowance - see the Tapered Annual Allowance section below for details.
Lifetime Allowance
The Lifetime Allowance (LTA) is the maximum amount you can save into all your pensions throughout your working life before you have to pay tax. The LTA for the tax year 6 April 2023 to 5 April 2024 is £1,073,100.
You would have to pay tax on any pension savings you have that are over the LTA limit. The amount of tax you owe will depend on your income tax rate, rather than the LTA charge that was in place before 5 April 2023.
You should be aware that from 6 April 2024, there is a limit of £268,275 on the amount you can take as a lump sum when you take your pension. This limit won’t affect you if you have Lifetime Allowance protections.
Tapered Annual Allowance
You will need to think about all your income over the tax year, such as earnings from work, your pension savings, and any other sources like shares and buy to lets. You will be affected by this Allowance if this combined income is over £260,000 and your taxable income is over £200,000.
Money Purchase Annual Allowance
This tax limit applies to your defined contribution pension and is currently £10,000. You could be affected if you take savings from your additional voluntary contribution arrangement with E.ON UK (for example, as cash or an annuity) and then pay more in.
The tax limits are subject to change. Find out more.