Choose the right pension scheme

All employers must provide workers with a qualifying workplace pension. This is called automatic enrolment.

Read more about automatic enrolment into a workplace pension.

Pensions and tax relief

There are other benefits to providing an occupational pension scheme. For pension schemes registered with HM Revenue & Customs (HMRC), extensive tax relief is available:

• employees' contributions attract income tax relief
• employer's contributions qualify for corporation tax relief (where the employer is a corporation). If the employer is unincorporated (for example partnerships) they may be subject to income tax relief
• scheme investments qualify for income tax and capital gains tax relief

This makes pensions a tax-efficient way of increasing employee benefits and remuneration.

Annual allowance

The pensions tax regime has been simplified to remove the various limits on what could be paid by or on behalf of an individual into different types of tax-privileged pension schemes. Now up to 100% of earned income can be contributed to a registered pension scheme with the benefit of tax relief. However, there is an overall ceiling for each individual on the annual amount of pension savings that can benefit from tax relief. This limit is called the annual allowance and is £60,000 for 2024-25.

Lifetime allowance

The lifetime allowance was abolished with effect from 6 April 2024.

Apart from the annual allowance, there are no tax rules on how quickly entitlement can be built up in a tax-privileged pension scheme, but individual pension schemes may set their own limits.