Modified on: May 2024

Pension tax relief – how to get a 75% return on your pension

Pension tax relief – how to get a 75% return on your pension

Pension tax relief is a closely guarded secret. In this article, I’m going to show you how to get a 75% return on your pension.

I know what you’re probably thinking, this is some clickbait crap – but stick with me.

Whilst a 75% return might seem like a ridiculous proposition, and I commend you if you’re reading this with a high degree of suspicion, it is, in fact, a fairly well-guarded secret.

It doesn’t involve building dicey hotels in Bulgaria or tax trickery in the Caymans either…

It’s actually using the UK Government incentive that rewards you for saving for your future. 


By giving you ‘pension tax relief’ on contributions you put into your pension.

How does pension tax relief work?

If you earn less than £50k, you get a 25% return

For every £1,000 you put into a pension, the government also puts in £250. This is called basic rate pension tax relief & provides a 25% uplift on the value of your contribution.

Not bad.

If you earn more than £50k you get a 50% return

For every £1,000 you put into a pension, the government also puts in £250. As above.

But for those earning over £50,000, you get to reduce your tax bill by another £250. This is ‘higher rate pension tax relief’.

 So, if you put in £1,000, you’ve effectively received £500 of free money (£250 into your pension + £250 reduced tax) – that’s an immediate 50% return.

If you earn more than £100k, you get a 75% return 

If you earn more than £100k the return on putting more money into a pension can be even greater. As earnings increase over £100k, you start to gradually lose your Personal Allowance (the amount of your income taxed at 0%).

As this is about to get very complicated, I won’t bore you with the nuts and bolts – all you need to know is that if your earnings are between £100k – £125k, your £1,000 contribution will effectively return a whopping 75% via pension tax relief.  

The actual return may be higher. I have a client who generated a 200% return by sacrificing his bonus into his pension.

There are of course a few caveats…

Pension tax relief limits

Before putting every penny you have into a pension, just hold your horses!

While it’s certainly possible to do this, pension legislation is a behemoth and there are incredibly complex rules around how much you can put in. 

“How much can I put into a pension?” should be a simple question, but it’s anything but!

There are all sorts of allowances and limits to consider, as well as any other contributions. Basically, the Government wants to restrict how much pension tax relief (free money) it’s going to give out. 

If you want to know how much you can put into a pension, drop me a line and I’ll work it out for you.

You also need to remember that your pension pot is effectively locked away until your 55 (increasing to 57 in 2028). 

All the best,

James Mackay, Independent Financial Adviser in Bristol

P.s. have you ever thought about how much you need to put into your pension to enjoy a comfortable retirement? Our sample financial plan has been designed to show you just that.



Financial Advisor Bristol and Pension Advisor Clifton

Frazer James Financial Advisers is an Independent Financial Advisor Bristol, Clifton.

About us: Frazer James Financial Advisers is a financial advisor, based in Clifton, Bristol. As an independent financial adviser, we’re able to provide independent and unbiased financial advice. We provide independent financial advice, pension advice, investment advice, retirement planning, inheritance tax planning and insurance advice.

If you would like to speak to a Financial Advisor, we offer an Initial Financial Consultation without cost or commitment. Meetings are held either at our offices, by video or by telephone. Our telephone number is 0117 990 2602.

Frazer James Financial Advisers is located at Square Works, 17 – 18 Berkeley Square, Bristol, BS8 1HB.

This article provides information about investing, but not personal advice. If you’re not sure which investments are right for you, please request advice.

Remember that investments can go up and down in value, you may get back less than you put in.

Related news

Arrow link
Arrow link
lady having a free meeting with a financial planner

Get in touch

Schedule a free consultation with one of our financial advisers, or give us call.

0117 990 2602