The maximum amount you can pay into your pension is £40,000 a year spread across all of your pensions, not just your Penfold pension. If you make any payments into your pension that exceeds this amount, you will have to pay a tax charge at your average tax rate.
There are limits on how much you can pay into your pension and get tax relief on these payments. You can pay up to 100% of your income within the tax year into your pension and receive tax relief on these contributions. For example, if you earned £30,000 a year, you can only pay £30,000 into your pension, and receive tax top-ups.
If you pay in more than what you earned within that year, you will not be tax charged, but you won't receive tax relief on the contributions above your income, and you will have to return the tax relief that we claim on your behalf, back to HMRC.
However, if your income is above £40,000, then £40,000 is the maximum amount you’re allowed to contribute into your pension a year that receives tax top-ups.
Therefore, whatever you earn a month you can put into your account on a monthly basis, but this cannot accumulate to an amount that exceeds £40,000 by the end of the year, including the government’s tax top ups.
If you're unsure about how much you should be saving into your pension, read our blog "How much money should I pay into my pension" or visit our calculator to have a play around with how much you could have when you come to retire.