For many people, pensions are seen as something to think about later in life rather than as part of annual tax planning. In reality, reviewing pension contributions before the end of the tax year on 5 April can be one of the most effective ways to reduce a current tax bill while also strengthening long-term financial security.

The key reason pensions are so powerful is the tax relief available on contributions. Money paid into a registered pension scheme benefits from income tax relief, which effectively boosts the value of the contribution. Basic rate taxpayers receive relief at 20 per cent, while higher and additional rate taxpayers can receive relief at 40 per cent or 45 per cent, subject to the rules.

Where pension planning becomes particularly valuable is for individuals whose income falls within certain bands. Those with income over £100,000 begin to lose their personal allowance, creating an effective marginal tax rate of up to 60 per cent. Similarly, families affected by the High Income Child Benefit Charge can face unexpectedly high marginal rates once income exceeds £60,000. In these situations, a pension contribution can reduce adjusted net income and restore allowances or reduce charges, often producing a much larger tax saving than expected.

For the 2025-26 tax year, the standard annual allowance is £60,000, covering all personal and employer contributions. Contributions are usually capped at 100 per cent of relevant UK earnings, although individuals with low or no earnings can still contribute up to £3,600 gross. Higher earners should be aware of the tapered annual allowance, which can significantly reduce the amount that qualifies for relief.

It is also important not to overlook the carry forward rules. Unused allowances from the previous three tax years may be available, allowing much larger contributions in a single year, provided the conditions are met.

A pension review before 5 April is not just about retirement planning. It is about understanding how pensions fit into wider tax planning and using the rules as they stand to make informed decisions. Taking advice before the year end ensures opportunities are not missed.