Pensions Derby | Adrian Mooy & Co

In simple terms, a pension scheme is just a type of savings plan with favourable tax treatment.

Pensions set up by your employer - also known as occupational pensions broadly fall under two main categories, these are: defined benefit schemes & defined contribution schemes.

Pensions set up by yourself - contract based schemes are provided by insurance companies and other pension providers. They’re effectively a contract between you and the pension provider and include Personal pensions, SIPPs, Stakeholder pensions & Retirement annuities.

How much can I pay into a pension?
If you're a UK taxpayer, for the tax year 2026/27 the standard rule is that you'll get tax relief on pension contributions of up to 100% of your earnings or a £60,000 annual allowance, whichever is lower.
For example, if you earn £20,000 but put £25,000 into your pension pot (perhaps by topping up earnings with some savings), you'll only get tax relief on £20,000.
Any contributions you make over the annual allowance won't attract tax relief and may be subject to a tax charge based on your marginal rate of Income Tax.
However, you can carry forward unused allowances from the previous three tax years, as long as you were a member of a pension scheme during those years.
But there are exceptions to this standard rule:
- If you have a defined contribution pension and have flexibly accessed it, a reduced Money Purchase Annual Allowance of £10,000 applies to further contributions to defined contribution schemes.
- The annual allowance is also tapered for high earners: it reduces by £1 for every £2 that your adjusted income exceeds £260,000, down to a minimum allowance of £10,000, and this taper only applies if your threshold income also exceeds £200,000.

Automatic enrolment — Since October 2012, whether you work full time or part time, your employer will have to enrol you in a workplace pension scheme if you:

are not already in a suitable workplace pension scheme
are at least 22 years old, but under State Pension age
earn more than £10,000 a year (for 2026/27)

As long as you meet these criteria, you'll also be covered if you're on a short-term contract or an agency pays your wages. If you earn less than £10,000, but above £6,240 (for 2026/27), your employer doesn't have to automatically enrol you in the scheme. You can still ask to join. Your employer can't refuse and must make contributions for you.

Accessing your pension
Since 6 April 2015, most people aged 55 and over with a defined contribution (money purchase) pension have had the freedom to draw down as much or as little of their pension pot as they want, whenever they want, following the pension freedoms first announced at Budget 2014. This minimum access age is due to rise to 57 from 6 April 2028.

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PENSIONS - A BRIEF INTRODUCTION

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