Pension planning is not a once-and-done task. It is an ongoing discipline that helps you convert today’s effort into tomorrow’s freedom. From April 2024, the lifetime allowance disappeared and new lump sum limits arrived. For 2025/26 the annual allowance remains £60,000, and the money purchase annual allowance stays at £10,000. Tapering still bites higher earners. These rules, alongside workplace auto enrolment and changing investment markets, mean the decisions you make now will shape the quality of life you can afford later. In short, good pension planning helps you manage tax, protect your family and build a reliable income for the years when work is optional, not obligatory (HMRC, 2025).
As an accountancy practice working with startups, growth-focused businesses and family firms, we see two broad challenges. First, many people do not contribute enough, often because cashflow feels tight or the rules feel complicated. Second, those who are contributing sometimes miss opportunities – for example, salary exchange, company contributions for directors, or claiming higher-rate relief correctly. Small tweaks add up over time. A planned approach keeps you on the right side of the rules and ensures you hold the right mix of pensions, ISAs and company profits to meet your aims.
What changed from 2024 and what matters for 2025/26
The lifetime allowance has been abolished. In its place are two new limits that cap how much of your benefits can be taken tax-free: the lump sum allowance: £268,275, and the lump sum and death benefit allowance: £1,073,100. These apply when you take tax-free cash or certain death benefits. The standard annual allowance remains £60,000; tapering reduces this for higher earners to as low as £10,000. If you have flexibly accessed a defined contribution pension, the money purchase annual allowance: £10,000 applies (HMRC, 2025).
A practical note on access age: you can usually access defined contribution pensions from 55, rising to 57 from 6 April 2028. Some people hold a protected lower age within specific schemes (HMRC, 2021).
Pension planning for individuals: build tax-efficient wealth
Well-structured pension planning lets you reduce tax today and build an income for tomorrow.
- Use available allowances: Contribute up to the annual allowance and consider carry forward from the previous three tax years if eligible.
- Claim higher-rate relief correctly: Check whether your scheme uses relief at source or net pay and claim any extra relief through self assessment if needed. (HMRC, 2025).
- Coordinate with ISAs: Balance pensions with ISA saving for flexibility before age 57 and to manage tax bands in retirement.
A quick reminder on tax relief: providers usually add 20% to your personal contributions in relief-at-source schemes, and higher-rate taxpayers may claim additional relief via self assessment (HMRC, 2025).
Pension planning for business owners and directors: use the company
Company-funded pension contributions are a powerful, legitimate way to extract value.
- Employer contributions: Deduct wholly and exclusively for the trade, subject to corporation tax rules and the annual allowance framework.
- Salary exchange: Reduce employee and employer NICs by exchanging part of salary for employer pension contributions, while staying inside the tapered and money purchase limits.
- Family firms: Equalise contributions between spouses or civil partners working in the business to spread allowances and future income.
If you flexibly accessed your pension in the past, remember the money purchase annual allowance: Limits you to £10,000 of defined contribution inputs a year (HMRC, 2025).
Workplace pensions: why regular reviews matter
Auto enrolment has brought millions into pension saving, but set-and-forget is risky. Official statistics show the combined market value of private sector defined contribution and public sector defined benefit and hybrid schemes rose by 7% between March and September 2024 – a reminder that asset values move and should be monitored (ONS, 2025).
For employees, that means checking fund choices, contribution rates and whether your risk level still fits your time horizon. For employers, it means reviewing scheme design, salary exchange, and communication so staff understand the value of contributions and tax relief.
Common mistakes we see – and how to avoid them
- Stopping contributions after accessing benefits: Triggers the money purchase annual allowance and restricts future saving. Plan before you draw.
- Ignoring tapering: Breaches can create unexpected annual allowance charges for higher earners. Track adjusted income and plan bonuses or dividends accordingly.
- Leaving tax relief unclaimed: Misses extra relief for higher-rate taxpayers in relief-at-source schemes.
- Not coordinating pots: Creates scattered funds with inconsistent risk and higher costs. Consolidation can help if it keeps valuable guarantees safe.
- Overlooking beneficiaries: Fails to keep nomination forms current. This matters for how death benefits are taxed under the post-LTA regime.
How much should you contribute?
There is no single right answer, but you can build a clear plan: define your target income, adjust for the State Pension, and back-solve the monthly amount. HMRC data shows individual contributions to personal pension schemes reached £14.6 billion in 2023/24, the highest in a decade, reflecting renewed engagement with retirement saving. (HMRC, 2025).
Rules of thumb can guide early decisions, but your plan should reflect your age, risk appetite, business profits and desired retirement date. We’ll help you model scenarios, including the effect of salary exchange, dividend policy, and the timing of asset sales.
A step-by-step review
- Know your allowances: Confirm your position on the £60,000 annual allowance, tapering thresholds of £200,000/£260,000, and whether the £10,000 money purchase annual allowance applies.
- Check access age: Plan withdrawals around the rise to 57 from April 2028 and consider bridging with ISAs or retained profits if you intend to retire earlier.
- Set contribution rates: Align personal and employer contributions with cashflow and profit forecasts.
- Review investments: Rebalance annually so risk matches your time to retirement.
- Protect your family: Update beneficiary nominations and consider life cover outside pensions if needed.
- Document decisions: Maintain board minutes for employer contributions and a record of advice received.
How we can help
We combine tax and pensions expertise with practical business experience. For individuals, we review contributions, relief, carry forward and investment mix. For owners and directors, we structure employer contributions, salary exchange and profit extraction to support long-term goals. If you are reviewing your scheme or setting one up for a growing team, we can help you assess cost, compliance and communications.
Strong pension planning gives you control over your future income, reduces today’s tax and supports your family if the unexpected happens. With the lifetime allowance gone and the lump sum allowance and lump sum and death benefit allowance now in force, 2025/26 is a good time to check your position, make full use of tax relief and align contributions with your goals. If you run a business, employer contributions and salary exchange can be an efficient, disciplined way to build wealth while keeping cashflow predictable.
If you would like a clear plan tailored to your situation, we can help. Request a pension planning review to align contributions, reliefs and investment choices with your retirement targets and your business or career plans. Get in touch and let’s build a confident retirement roadmap together.