Your pensions may be the cornerstone of your retirement plan, likely providing a significant portion of your income in later life.

Saving in a pension has several key benefits, as you may also receive employer contributions and tax relief on top of your own payments. You could see regular growth from the investments in your pension, too. This often means that contributing to a pension allows you to build wealth faster than cash savings or other investments.

As such, when the end of the tax year approaches on 5 April and you are reviewing your finances, it’s important to pay close attention to your pension.

Here are three common mistakes you might want to avoid.

1. Not taking advantage of the Annual Allowance

To encourage savers to use their pensions, the government offers tax relief on contributions. This effectively means you don’t pay Income Tax on any funds you pay into your pension, and there are a few ways tax relief may be applied.

Most workplace pensions operate a “relief at source” system. This means your Income Tax and National Insurance contributions (NICs) are taken from your earnings before your pension contributions. Then, when you pay into your pension, the provider claims tax relief – the Income Tax you have already paid on those funds – and puts it into your pot.

You automatically receive 20% tax relief, but if you’re a higher- or additional-rate taxpayer, you can claim the extra 20% or 25% through Self Assessment.

This means that a £100 contribution only “costs” you £80 because the other £20 comes in the form of tax relief.

Although less common, some pension schemes operate a “net pay” arrangement. This means your pension contributions are taken before Income Tax and NICs are calculated, resulting in a lower taxable income and less tax to pay.

However, in both cases, you only benefit from tax relief on contributions up to 100% of your earnings. Also, any contributions that exceed your Annual Allowance (£60,000 in 2025/26) will trigger a tax charge, effectively recouping tax relief on any amount above the threshold.

Your Annual Allowance resets at the start of each tax year, so you may want to use as much of it as possible before 5 April to maximise the amount of tax relief you benefit from.

Additionally, if you’ve already used your full Annual Allowance for the current tax year, you can carry over unused allowance from the previous three tax years.

Failing to take full advantage of your Annual Allowance could mean you miss opportunities to build wealth tax-efficiently.

2. Overlooking changes to your Annual Allowance

In some cases, your Annual Allowance may be lower than £60,000. Overlooking potential changes to the allowance is another common mistake that could lead to you contributing too much to your pension and triggering a tax charge.

There are two main reasons why your Annual Allowance may change.

The Tapered Annual Allowance

First, if your earnings exceed a certain threshold, your Annual Allowance may be lower than £60,000. To determine whether this is the case, you must consider your:

• Threshold income – Your total taxable income, excluding employer pension contributions.
• Adjusted income – Your threshold income, plus your employer pension contributions.

If your threshold income exceeds £200,000 and your adjusted income is over £260,000, you trigger the Tapered Annual Allowance.

This means your Annual Allowance falls by £1 for every £2 your earnings exceed £260,000. This continues until your Annual Allowance reaches the lower limit of £10,000.

The Money Purchase Annual Allowance

Your Annual Allowance may also fall if you have flexibly accessed your defined contribution (DC) pension. Once you begin drawing an income from your savings, you trigger the Money Purchase Annual Allowance (MPAA).

This reduces your Annual Allowance to £10,000.

If either of these changes affects you and you don’t realise, you could contribute too much and exceed your Annual Allowance, meaning you accidentally trigger a tax charge.

That’s why it’s important to seek professional advice at the end of the tax year, so you understand precisely how much Annual Allowance you have available.

3. Oversubscribing to your pension and neglecting other priorities

Taking advantage of the Annual Allowance and benefiting from pension tax relief is important, as it helps you build your retirement pot. In some cases, contributing the full £60,000 to your pension at the end of the tax year is a suitable choice that aligns with your wider financial goals.

However, the fear of losing unused Annual Allowance might encourage you to make rushed decisions at the end of the tax year, paying large sums into your pension.

It’s important to remember that you can’t normally access the wealth in your pension until you’re 55 (rising to 57 from April 2028). Consequently, once you decide to contribute, you lock those funds away.

This could be a problem if you oversubscribe to your pension and neglect other priorities such as building your emergency fund or paying for short- to medium-term goals, including holidays or a child’s education.

As such, it’s important that you don’t miss opportunities to use your Annual Allowance but also consider how your pension fits into your wider financial plan.

Get in touch

We can help you manage your pensions at the end of the tax year.

Please contact us at hello@ardentuk.com or call or WhatsApp us on 01904 655 330. As an award-winning financial advice company with advisers included in the 2025 VouchedFor Top Rated guide, we can assure you that we’re a bona fide company providing excellent advice and high-quality service.

Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate tax planning.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.