Understanding individual pension contributions
Up to 30 CPD minutes
Module description
Introduction
Pensions are the most tax efficient way to save for retirement. Tax relief on contributions combined with virtually tax free investment growth and the ability to access a quarter of the fund tax free make them the ideal for this purpose. But how much an individual can contribute to their pension may be limited by their earnings and allowances. In order to maximise pension savings it is essential that advisers fully understand how much an individual can pay into their pension.
This module should take around 30 minutes to complete. Once you have completed all the sections there is a short self-assessment quiz to check what you have learned and a CPD certificate for up to 30 minutes can be claimed.
This module should take around 30 minutes to complete. Once you have completed all the sections there is a short self-assessment quiz to check what you have learned and a CPD certificate for up to 30 minutes can be claimed.
Outcomes
On completion of this module you should be able to:
- Explain what limits may apply to pension funding
- Describe how tax relief is provided on pension contributions
- Explain how making a pension contribution could restore lost personal allowance or child benefit
Learning material
This module looks at how much an individual can contribute to their pension and what factors may limit funding. It outlines how tax relief is given and some of the indirect benefits of making a pension contribution.
CPD minutes: up to 30
Read the Individual pension contributions guideOpens in new windowCPD minutes: up to 30
Post learning assessment
Question 1
Which of the following DO NOT count as relevant UK earnings for pension funding?
a. Rental income
b. Self-employed profits
c. Salary
d. Benefits in kind
a. Rental income
b. Self-employed profits
c. Salary
d. Benefits in kind
Question 2
If tax relief on pension contributions is provided by relief at source, are the following statements true or false?
a. The employer deducts contributions from the employee’s gross pay
b. Contributions are paid net of basic rate tax
c. The basic and higher rate tax bands are extended by the amount of the gross pension contribution
d. Higher and additional rate relief is not added to the pension and has to be claimed via self-assessment
a. The employer deducts contributions from the employee’s gross pay
b. Contributions are paid net of basic rate tax
c. The basic and higher rate tax bands are extended by the amount of the gross pension contribution
d. Higher and additional rate relief is not added to the pension and has to be claimed via self-assessment
Question 3
Which of the following allowances is not designed to limit pension funding?
a. Tapered annual allowance
b. Annual allowance
c. Money purchase annual allowance
d. Personal savings allowance
a. Tapered annual allowance
b. Annual allowance
c. Money purchase annual allowance
d. Personal savings allowance
Check your answers
Which of the following DO NOT count as relevant UK earnings for pension funding?
a. Rental income
a. Rental income
If tax relief on pension contributions is provided by relief at source, are the following statements true or false?
a. FALSE
b. TRUE
c. TRUE
d. TRUE
a. FALSE
b. TRUE
c. TRUE
d. TRUE
Which of the following allowances is not designed to limit pension funding?
d. Personal savings allowance
d. Personal savings allowance
Any reference to legislation and tax is based on our understanding of United Kingdom law and HM Revenue & Customs practice at the date of production. These may be subject to change in the future. Tax rates and reliefs may be altered. The value of tax reliefs to the investor depends on their financial circumstances. No guarantees are given regarding the effectiveness of any arrangements entered into on the basis of these comments.