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.
Depending on whether you're earning or not, there are two different maximum amounts you can pay into your pension and receive the government's tax relief. See below.
I'm not earning
If you're not earning any UK relevant earnings (employment income such as pay, wages, bonus, overtime & commission that is taxable), then the maximum you can contribute into your pension each year is a total of £2,880. This contribution will receive the government's 25% tax relief of £720 to make a total £3,600 contribution into your pension.
There are limits on how much you can pay into your pension and get tax relief on these payments. Including the government's 25% tax relief contribution, you can contribute your total annual income within the tax year into your pension. For example, if you earned £30,000 a year, you can pay £22,500 into your pension, and receive the government's 25% tax relief contribution of £7,500, to make the total annual earning amount of £30,000.
If you pay in more than what you earned within that year you will not be tax charged (up to £40,000), but you will have to get in touch with HMRC to return the tax relief that we claim on your behalf.
However, if your income is £40,000 and above, then £32,000 is the maximum amount you’re allowed to contribute into your pension a year that receives a £8,000 tax top-up.
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.