If I contribute money into my SIPP does the government match it?
28 June 2023
Question by Blake
If I contribute money into my SIPP (Private Pension) does the government match it or contribute a certain percentage as well?
Answered by Holly Mackay
If you pay tax in the UK, you will generally get what is called ‘tax relief’. Effectively the Government gives us all an incentive to save, so they rebate the tax we have paid on the income we pay into a pension. Translating this into £s, basic rate taxpayers pay 20%. So you get this 20% refunded on pension contributions. So if you pay £80 into a pension, you will see £100 appear on your pension statement.
If you’re a higher rate taxpayer you can go further and claim back a further 20% when you do your annual tax return i.e. reduce your taxable income by a further £20 for that £80 you paid in.
There are caps each year and various rules to observe – like you can only pay in about £40,000 a year but this doesn’t worry most people!! But generally speaking there are generous incentives to try and persuade us to take today’s money – and put it in a tomorrow pot. I hope that makes sense.