May 13th, 2020

Can you continue pension contributions after drawdown?

We hear a lot of savers asking the same question: can you continue pension contributions after drawdown? The short answer: yes, it’s possible. The longer answer: the amount you can contribute depends on your age and how you have accessed your pension so far. Let us explain.

If you’ve already retired

The fact that you’ve retired doesn’t automatically mean you can’t continue topping up your pension. Especially as maintaining your contributions could earn you up to £720 per year, for doing nothing.

Here’s how it works. Despite the fact that you have started drawing from your pension, you can still channel up to £3,600 per year into your pot. But remember: the government automatically tops up your pension contributions by 20%.

In other words: to reach your £3,600 threshold, you only need to add £2,880 to your pot. The government will pay the rest. And you can claim back another 20% via your tax return if you are a higher rate taxpayer.

If you’re still working (and haven’t flexibly accessed your pension)  

Okay, let’s look at the next scenario. You have started drawing from your pension, but you are still working and want to maintain your pension contributions. Is that possible? It all depends on how you have accessed your pension so far.

As long as you haven’t taken taxable pension income, you can still contribute up to 100% of your earnings into your pot. Even if you have purchased an annuity or accessed the tax-free element of your pension via drawdown, you can reap the benefits of continued pension contributions.

If you’re still working (and have flexibly accessed your pension)

Final scenario: if you have taken income beyond the tax-free element from your pension, and you are still working, you can still make contributions to your pot. However you will not be able to contribute more than £4,000 per year. That includes contributions from your employer.

Put your money to work for your future

Everyone wants to have a retirement that’s free of money worries. But knowing how to make that happen isn’t always easy. In truth it involves lots of little decisions along the way. But it’s never too late to start making smarter financial choices that encourage your money to work harder for your future financial security. If you would like to know how, our team of independent financial advisers can help you. Just get in touch to start an informal conversation about how we could work together. We would be happy to answer your queries.

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