10 reasons to boost pension pots before April 2026
David Downie discusses ten reasons to boost pension pots before April 2026, covering allowances, tax relief, carry forward and key year‑end planning opportunities.
Duration: 6 Mins
Date: 24 Feb 2026
1. Annual allowance
The annual allowance for the current year has been maintained at £60,000, an increase of £20,000 from 2022/23. The extra scope to pay more into pensions could reduce the higher tax bills faced by some clients whose earnings have crossed the higher rate or additional rate thresholds.
The personal allowance and basic rate bands have been frozen since 2021 and the additional rate tax threshold remains at £125,140. With the freeze extended until 2031, more clients will be dragged into higher bands as earnings rise. A pension contribution will extend both the basic rate and higher rate bands by the gross amount paid. Extending the bands may also provide an opportunity to reduce tax on bond gains taken in the year.
There are some planned increases to the Scottish tax bands in the 2026/27 tax year. This means that pension contributions made in 2025/26 could attract more tax relief for Scottish savers.
2. Carry forward of annual allowance
Maximising this year's annual allowance, plus unused allowance carried forward from the last three years, allows a maximum contribution of £200,000 for those that have had a break from pension funding. Clients must have enough 'relevant UK earnings' in the current year to get full tax relief on individual contributions (providers may not allow contributions in excess of earnings).
3. No LTA charges
The lifetime allowance (LTA) charge has been scrapped, so those who had previously put the brakes on funding to stay within LTA may wish to recommence pension savings.
Even if a client's existing benefits exceed the 'lump sum allowance', meaning they are not entitled to any further tax-free cash, pensions can still be a great place to save. If the tax relief received on the contributions mirror the tax payable when benefits are taken, it is tax neutral. Although most pensions will form part of the estate from April 2027, savers will still enjoy investment returns free of income tax and CGT.
Only where a client's tax position in retirement is likely to be higher than the relief on the contributions will they be worse off - for example, if they withdrew all the benefits in one go.
4. Clients with enhanced or fixed protection
Those with either enhanced or fixed protection had to stop paying into their pensions years ago as a condition of maintaining a higher LTA. With the LTA abolished, the protection now provides a higher 'lump sum allowance' and 'lump sum and death benefit allowance'.
Provided the protection was in place as of 15 March 2023 and hadn't been lost or revoked before 6 April 2023, these individuals have been able to recommence pension funding since 6 April 2023 without invalidating their protection. If nothing was paid last tax year, then a possible contribution of up to £200,000 could be made this year to boost savings by using carry forward before the new tax year. Personal contributions would need the 'relevant UK earnings' to justify them.
5. Avoiding the tapered annual allowance
The annual allowance is tapered down by £1 for every £2 of 'adjusted income' over £260,000 until it reaches £10,000. But the full £60,000 allowance can be reinstated if the client can make a personal contribution large enough so that their 'threshold income' drops to £200,000 or less. See our Techzone 'Annual allowance' guide for more information.
6. Bonus sacrifice
The tax year end often coincides with a business's year end and, for some employees, this could mean a bonus payment. 'Exchanging' a bonus for an employer pension contribution before the tax year end can bring several benefits.
The employer and employee NI savings made could be used to boost pension funding, giving more in the pension pot for every £1 lost from take-home pay.
The amount of salary or bonus which can be sacrificed and enjoy NI savings is to be capped at £2,000 from April 2029. So this might be one of the last chances to sacrifice large bonuses and benefit from the NI savings in full.
7. Business owners
Often, directors will take a significant amount of their profits as a dividend. From 6 April 2026 the dividend ordinary rate and upper rate will increase to 10.75% (currently 8.75%) and 35.75% (currently 33.75%) respectively. There will be no changes to the additional rate which remains at 39.35%.. They are still less than income tax rates. But dividends are paid from profits after corporation tax. This can mean that using some of those profits to make an employer pension contribution with full corporation tax relief instead can be economically advantageous.
8. Retention of the personal allowance
Personal contributions can help reclaim the personal allowance as they're seen as a deduction from earnings. The personal allowance is reduced by £1 for every £2 of earnings (specifically 'adjusted net income' or ANI) in excess of £100,000. It is lost in full for those with ANI in excess of £125,140 so any contributions that reduce ANI between £125,140 and £100,000 have an effective rate of tax relief of 60%.
9. Retention of child benefit
The entitlement to child benefit is assessed on the highest earner of a household and is reduced by 1% for every £200 of ANI in excess of £60,000, with it being lost in full for those individuals earning £80,000 or more.
In 2025/26 the child benefit rates for the eldest or only child is £26.05 per week and £17.25 for each additional child, a total of ££2,251.60 per annum for a typical family with two children. Making a pension contribution to reduce the ANI to the £60,000 threshold could offer them the opportunity to claim this tax-free benefit, further improving the effective rate of tax relief on the contribution.
10. Tax-efficient planning for couples
For couples, consider maximising tax relief at higher rates for both, before paying contributions that will only secure basic rate relief. Many clients won't know they can top-up pensions for their partners - and not just by £3,600, but up to their partner's earnings. Tax relief will be given at the partner's marginal rates of tax.
And of course, the opportunity to fund someone else's pension doesn't stop at spouses and partners. Those looking to make gifts to their children and grandchildren could make third party contributions to a pension for them, with recipient able to benefit from tax relief on that gift. Regular gifting in this way from surplus income could be very IHT effective as the gifts may be immediately outside the estate for IHT if the conditions for the exemption are met.
Summary
Pensions remain the most tax efficient way to save for retirement for most people. The availability of tax-free cash, coupled with augmented returns from the available tax relief during working life, outweighs the income tax paid in retirement.
Effective tax planning is a year-round job. But it's only at the end of the tax year that you have all the information needed to use the allowances and reliefs in a tax efficient way. This can be a boost to savings but remember that, in most cases, allowances not used before the end of the tax year will be lost altogether.
The views expressed in this article should not be regarded as financial advice.
Any reference to legislation and tax is based on Aberdeen's understanding of United Kingdom law and HM Revenue & Customs practice at the date of production. These may be subject to change in the future.
