Pension Contributions for those whose income exceeds £130,000 per annum
Changes to pension rules for high earners were included in the 2009 Budget and Pre-Budget Report.
1. Higher rate relief continues you can claim higher rate relief of 40% on your contributions up to £20,000.
2. A larger allowance If you made any lump sum contributions during the last three tax years, you can claim higher rate relief on contributions up to £30,000. If your contributions during the last three tax years were between £60,000 and £90,000, your maximum contribution is one third of the total of the last three years contributions. Above £90,000 your maximum contribution is £30,000. Below £60,000 your maximum contribution is £20,000. Regular savings (monthly or quarterly) exceeding this limit started prior to the announcements still receive full tax relief although you would not be able to claim higher rate relief on further lump sums.
3. 20% basic rate tax relief on contributions exceeding your allowance this is unaffected. The revenue will pay 20% of your contributions up to the value of your earnings (effectively capped at £245,000).
If your income is under £150,000, you can in the current tax year make a pension contribution as large as the value of your earnings and attain higher rate tax relief. This is because personal contributions up to £20,000 can be offset against your income when calculating if your income is under £130,000. This only applies if your total income is less than £130,000 in each of the two previous tax years.