How do I top up my pension?

If you want to boost the value of your pension, the easiest way is to pay more money in.

You can do this at any time, but as retirement draws closer, you may feel more motivated to pump up your pot.

After all, the more you manage to save, the bigger your potential income, when you do eventually retire.

Find out how to make large contributions and the key considerations you need to make, with our guide.

How do pensions work?

Most workplace pensions (and all personal pensions) involve you paying into one or more investment funds. Over the years, it should steadily grow and provide you with a pot of cash to fund your retirement.

You can access your pension in a number of ways from the age of 55 (57 from 2028).

But unlike other investment accounts, money paid into your pension qualifies for tax relief.

This government top up effectively rebates the tax you would have paid on that money and, over time, will give the value of your pot a considerable boost.

Your pension wealth is also protected from capital gains tax (CGT) and dividend tax, making it a powerful way to maximise your retirement savings.

Find out more about how pensions work.

What are the benefits of making large pension contributions?

Normally you’ll pay a regular sum into your pension each month.

However, there are several reasons why you might want to make large one-off contributions.

Increase your pension pot

This is the simplest reason: it’s good to store away as much money as you can in your pension, to generate as much growth as possible before you need to start drawing an income from it.

Remember your pension may need to support you for 30 years or more.

Boost your savings with tax relief

Contributions benefit from tax relief, linked to the rate of tax that you pay.

This means that the cost of investing £100 into your pension is:

• £80 if you pay basic rate tax

• £60 if you pay higher rate tax

• £55 if you pay additional rate tax

Just be aware that your pension may only pay basic rate relief automatically (including pensions you arrange yourself, like SIPPs).

So, if you pay a higher rate of tax, you may need to claim the outstanding relief that you are entitled to from HMRC.

Some workplace pensions will pay the full rate of relief you’re due automatically, but not all will.

Check with HR if you aren’t sure how yours works.

Use up your annual allowance

Everyone has an annual allowance: the maximum you can pay into pensions each year (currently 100% of earnings up to £60,000) and still get tax relief on contributions.

But, you may also be able to roll over any unused allowance from the previous three tax years.

For example, if you paid  £20,000 into your pension over the past two years, then this year, you’d be able to pay in up to £140,000.

This would be made up of £60,000 for this year, plus £40,000 unused allowance from each of the last two years. 

However, to make a contribution of that size, you would need to earn £140,000 in the current year because you cannot pay in more than 100% of your income.

Avoid the child benefit tax charge

Child benefit is worth £3,268.20 a year to a family with three children in the 2026/27 tax year. The first child is eligible for £27.05 a week, and then £17.90 per child per week thereafter.

However, if you’re a high earner, you may be liable to pay a tax charge known as the high income child benefit charge.

If either partner in a couple earns £60,000 or more, the charge is 1% for every £200 over £60,000 you earn, which means the charge completely cancels out the value of child benefit if either parent earns £80,000 or more.

However, paying into your pension reduces your taxable income that contributes to this threshold, meaning you could reduce your income to below £60,000 and keep your full child benefit.

As mentioned, there’s additional tax relief with pension contributions, which can make this a high-value strategy if you’re close to the earnings threshold and have kids.

Maximise your bonus

If you receive bonuses from your employer, you may be able to get better value by asking for an employer pension contribution instead.

This is because tax relief means you will get the full value of your bonus going into your pension.

If the bonus is paid alongside your salary, it will be subject to tax and national insurance, which could take a significant slice out of your windfall.

When is a good time to pay more into my pension?

You can make additional payments into your pension at any time. Just remember that you can’t access your pension until you’re 55 at the earliest (rising to 57 in 2028), so don’t pay in any savings that you may need in the meantime.

Once you reach 55, you could transfer savings into your pension (and get tax relief on the contribution) knowing that you can access them again if you need to.

Be aware, however, that a pension is not like a bank account, and there may be drawbacks to accessing your pension too early – see below. A financial adviser can help you decide what to do.

What are the drawbacks of transferring savings into my pension?

Despite the boost to your savings if you move them into your pension, there are some disadvantages of doing this.

Make sure you consider these before making any decisions.

1. Pension withdrawals can be taxed

When you draw money from your pension, it counts as income and so can be taxed. 

You’ll still have your tax-free personal allowance (£12,570), but any income above this will be taxed at your normal rate of income tax.

This means that if you want to make larger withdrawals from your pension, you could end up with a big tax bill.

You’ll usually be able to withdraw 25% of your total pot as a tax-free lump sum, up to a maximum of £268,275 across all your pensions - this is called the lump sum allowance (LSA). This does not affect your personal allowance.

2. Pensions can fluctuate in value

Pensions are invested in assets designed to deliver long-term growth. This means that in the short term they can fluctuate a great deal.

Bear this in mind if you want to access a large sum in the near future (e.g. to buy an annuity) – in which case you may want to move your pension fund into lower-risk assets.

 3. Accessing your pension limits how much you can pay in

Although you can access your pension at any time from the age of 55, doing so may reduce the amount you can pay into it in the future.

You, therefore, need to take care if you’re planning to start taking pension income and want to carry on contributing to your pension.

Once you take taxable income from your pension, your annual allowance reduces to just £10,000 (from £60,000) under money purchase annual allowance (MPAA) rules.

However, taking a tax-free lump sum and not taking income, or buying an annuity won’t trigger the lower MPAA allowance.

You also might be worried about exceeding the lifetime allowance (LTA), which previously capped the amount you could save into your pension without facing tax penalties. However, this was scrapped in April 2024.

So, you no longer need to worry about exceeding the LTA, regardless of how much you pay into your pension or how much it grows.

Should I top up my pension?

If you have savings or income to spare and are approaching retirement age, additional contributions may be a good idea for you.

However, you should talk to a financial adviser first to ensure you are making the best decision.

Get expert financial advice

Topping up your pension before retirement can significantly boost your retirement finances. It could increase the size of your tax-free lump sum and your future income.

However, it’s important to consider the timing, your overall financial goals, and any potential drawbacks, such as taxation on withdrawals and MPAA limitations.

By carefully weighing the pros and cons, you make the most of your pension contributions as you approach retirement.

Let Unbiased match you with a financial adviser for expert financial advice tailored to help you optimise your pension contributions and boost your retirement savings.

Did you find this article useful? Then you might also find our article on pension alternatives informative, too!