Reeves Blogs

Using Tax Allowances to Grow Your Pension Pot

Updated: Jul 22


Sally Charrington is already benefiting – to the tune of £1,180 – from our annual end of tax year campaign.


She made herself and her husband Nick better off by booking an early call with Reeves Independent to review her tax and saving situation to ensure she was gaining the maximum benefit for her pension pot. This is part of our campaign, which runs from now to the end of March.


Releasing The Funds


Sally, 65, is retired after a career working as a marketing consultant. She is married to Nick, 63, who still works as the head of his own light engineering company. Sally does receive some rental income but the review revealed that Sally will have £3,000 worth of income tax allowance left to use for the tax year that ends April 5th. In other words, she can receive this much taxable income and pay no income tax.


We can maximise this allowance by releasing £3,000 of taxable income from Sally’s pension. If she doesn’t do this now, the risk is that, when the money does eventually come out of her pension, Sally may not still have this allowance and so will pay 20% tax.


When accessing pension funds - known as ‘crystallising’ the pension - we have to break it into its two component parts: 25% tax free and 75% taxable. So we would take £4,000 from Sally’s pension. Of this, £1,000 is tax free and £3,000 is taxable but can be set against the unused allowance, so we pay all of this to Sally.


Then we set about reinvesting the money.



Re-Investing The Funds


Sally’s maximum pension contribution for this year is £2,880 - the maximum pension contribution for anyone under 75 to qualify for £720 tax relief from HMRC, which is added to the pension.


Out of the £4,000, this leaves £1,120 which can be put towards Nick’s pension.


This will attract £180 in tax relief from HMRC, which is added to his pot and, as Nick is a higher rate tax payer, up to another £180 can be reclaimed from HMRC in higher rate tax relief, but this will come straight back to Nick instead of the pension.


So, as a result of a brief telephone conversation with Reeves Independent, Sally was able to take £1,180 back from the tax-man for herself and her husband.


Find out if you could benefit like Sally and book your meeting with Reeves Independent today.



No advice should be conferred from the articles. No action should be taken without independent professional financial advice as any actions on your pension may be irrevocable and have a big impact on your income in retirement.


Names have been changed to protect identity.


Please note that tax rates and reliefs are dependent upon an individual’s unique circumstances. These tax reliefs and rates differ between Scotland and England.

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