Is is true that the annual pension allowance (£40k) is void on the last year you work before you retire, so you can contribute more than £40k without paying tax?

Is it correct that the annual pension allowance (£40k) is void on your last year of work before you retire, so you can contribute in excess of £40k without paying tax?

Hi Steve,

Thanks for your question.

No, this is not the case. Personal pension contributions are subject to the lower of your net relevant earnings or £40,000 even in your last year of work. If in any year you earn more than £40,000 and wish to contribute, you may be able to contribute via 'carry forward' to receive tax relief of more than the £40,000 limit (subject to holding the UK registered pension for 3 years and available allowance not used in previous years).

Even if you have no net relevant earnings, you can still contribute £3,600 gross (£2,880 net) into a pension to receive tax relief.

Any contributions above net relevant earnings could still be tax efficient for inheritance tax planning if applicable.

Hope this helps.