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Pensions and tax relief

I have two linked questions regarding this year's changes in tax relief on pension contributions. Does the limit on contributions of £20,000 for the next two years apply even though my current income is below £150,000 and is not likely ever to exceed it as I have gone half time? Does the limit also apply to lump sum contributions for additional pension within the NHS Pension Scheme? NHS Pensions' calculator at www.nhsbsa.nhs.uk/pensions tells me that purchasing £5,000 worth of extra pension a year will cost £90,400. Although I cannot afford this much I would like to put in an amount equivalent to my income paid at the tax band of 40 per rate in the year in which I retire.

Limiting tax relief on pension contributions will only affect individuals with an annual income over £150,000 who increase their pension contributions after 22 April 2009 beyond their normal regular level.

If your income is below the £150,000 limit and you contribute more than £20,000 these rules will not affect you. For example, if a GP's income is over £150,000 a year and they pay NHS superannuation contributions of £40,000, they would still receive full tax relief on the £40,000 if this was an arrangement in place before 22 April 2009.

For example, assume the same GP wanted to buy additional pension after 22 April. As the purchase did not take before this date, their income is over £150,000 and their pension contributions are over £20,000, the tax relief on contributions to buy the additional pension would be 20 per cent rather than 40 per cent.

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