Members of staff who join one of Imperial's pension schemes benefit from part of their contribution, which would normally automatically go to the Government in tax, going into their pension instead. There is no restriction on the amount that can go into individuals' pensions, but there are annual and historical lifetime limits on how much tax relief individuals receive on their pension contributions.
Tax relief on your annual pension contributions
Members of staff who are UK taxpayers in the tax year 2025-26 will receive tax relief on pension contributions of up to 100% of their earnings or a £60,000 annual allowance (AA), whichever is lower.
- For example, if you earn £20,000 but put £25,000 into your pension pot (perhaps by topping up earnings with some savings), you will only get tax relief on £20,000.
- Similarly, if you earn £80,000 and want to put that amount in your pension scheme in a single year, tax rules mean you will normally only get tax relief on £60,000. Any contributions you make over £60,000 will be subject to income tax at the highest rate you pay unless you have carried forward unused allowances from the previous three years and were a member of a pension scheme during those years.
There are exceptions to the above rule, and further information can be obtained initially from Pensions. Alternatively, consult with a regulated financial adviser for advice on how to proceed.
Information
HMRC introduced a lower annual allowance for individuals with higher incomes, which applied from the tax year 2016-17 onwards. HMRC describes this as 'tapering'. Tapering will only apply if you have a 'threshold income' over £200,000 and an 'adjusted income' of over £260,000 in this tax year.
The effect of the taper is to reduce your AA (and therefore increase your tax if you accrue benefits/make contributions above the rate of your reduced AA) as your salary increases. The AA is reduced by £1 for every £2 of adjusted income above £260,000, down to a minimum AA of £10,000.
The USS annual allowance modeller will help you identify if you will be required to pay additional tax at your highest rate.
The lifetime allowance (LTA) for Pension savings was a limit on the value of money individuals receive from their pension schemes – whether lump sums or retirement income – that can be made without triggering an extra tax charge.
The limit was removed entirely in April 2024, when the limit was £1.073M, and no tax is due if your pension savings are in excess of this sum. There is a limit on the maximum amount of tax-free cash you may withdraw, though.
This remains 25% of the previous LTA figure, or £268,275. Any withdrawals over this amount are treated as taxable income