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.
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.
Lifetime Allowance
The Lifetime Allowance (LTA) was abolished from 6 April 2024 and new Lump Sum Allowances were introduced.
Historically, the LTA was the maximum amount you could build up in all of your registered pension savings throughout your working life before you had to pay additional tax.
With the abolition of the LTA there is no limit on the amount of pension savings you can build up. However, lump sum limits or allowances have been introduced. This includes the Lump Sum Allowance (LSA) which for most people limits the tax-free cash or lump sum you can receive from all your pensions to £268,275 (the amount being the same as 25% of the LTA at abolition)
If you have an LTA protection, you may have a higher allowance than set out above.
For further details please see the other allowance details below or visit gov.uk/tax-on-your-private-pension
Lump Sum Allowance
The Lump Sum Allowance (LSA) is a cap on the amount of tax-free lump sum you can receive from all your registered pension arrangements.
The standard LSA is £268,275. If you have an LTA protection, you may have a higher allowance than set out above.
If the only pension arrangement you are a member of is the E.ON UK Group of the ESPS, you only need to consider whether the total tax-free lump sum you want to take from this Scheme is more than your available LSA.
If you have previously taken pension benefits from either the E.ON UK Group of the ESPS or another scheme, it will be taken into account and will reduce the available LSA for future retirements.
Depending on the rules of the Scheme you may be able to take a lump sum in excess of the available LSA. This excess amount is called a Pension Commencement Excess Lump Sum (PCELS) and is liable for tax at your marginal rate. Alternatively, if the Scheme rules allow, the excess may be converted to additional annual pension.
The Lump Sum and Death Benefits Allowance (LSDBA)
This is the cap on the tax-free lump sum that can be paid to, or in respect of, a member of a registered pension scheme. If the value of lump sum death benefits means that the LSDBA will be exceeded, the excess may be taxed at the marginal rate of income tax of the person receiving it.
The standard LSDBA is £1,073,100. If you have an LTA protection, you may have a higher allowance than set out above.
Overseas Transfer Allowance (OTA)
This only applies to transfers out to a Qualifying Recognised Overseas Transfer Scheme. The OTA limit will be £1,073,100, unless a valid LTA protection is held. If the transfer value exceeds the OTA, there will be an overseas transfer charge (OTC) of 25%.