When it comes to paying in pension contributions, Smart Pension uses a net pay arrangement, rather than a relief at source arrangement. We believe it makes life easier for most of our pension scheme members.
Your situation is unique, and so is your liability for paying tax. For that reason, it's best to ask your employer or a financial adviser for information about tax relief and your pension. Here, we can give you an overview of both types of tax arrangements – net pay arrangements and relief at source.
When it comes to paying in pension contributions, Smart Pension uses a net pay arrangement, rather than a relief at source arrangement. We believe it makes life easier for most of our pension scheme members.
Your situation is unique, and so is your liability for paying tax. For that reason, it's best to ask your employer or a financial adviser for information about tax relief and your pension. Here, we can give you an overview of both types of tax arrangements – net pay arrangements and relief at source.
Instead of passing some of your money to the government as tax, it goes into your pension instead. That's tax relief. It's the government's way of encouraging you to save for retirement. The amount of tax relief you get relates to the amount you put into your pension scheme. Tax relief gets paid on your contributions at the highest rate of income tax you pay.
The Welsh Government now has powers to set its own income tax as well.
You can put as much money as you want into your pension, but the government limits the amount of pension contributions on which you earn tax relief. This is called the pensions annual allowance.
For the tax year 2021-22, this is set at £40,000. Any pension contributions going over the £40,000 limit will be subject to an annual allowance charge at the highest rate you pay (but you can also carry forward unused allowances from the previous three years, as long as you were a member of a pension scheme during those years). If you have already started to take your pension, a lower limit of £4,000 may apply.
Instead of passing some of your money to the government as tax, it goes into your pension instead. That's tax relief. It's the government's way of encouraging you to save for retirement. The amount of tax relief you get relates to the amount you put into your pension scheme. Tax relief gets paid on your contributions at the highest rate of income tax you pay.
The Welsh Government now has powers to set its own income tax as well.
You can put as much money as you want into your pension, but the government limits the amount of pension contributions on which you earn tax relief. This is called the pensions annual allowance.
For the tax year 2021-22, this is set at £40,000. Any pension contributions going over the £40,000 limit will be subject to an annual allowance charge at the highest rate you pay (but you can also carry forward unused allowances from the previous three years, as long as you were a member of a pension scheme during those years). If you have already started to take your pension, a lower limit of £4,000 may apply.
In this arrangement, payments are taken from your gross salary before income tax has been deducted. This means you get tax relief via PAYE at the highest marginal rate. You don’t have to claim any tax relief on your wages from HMRC, even if you pay income tax at higher than basic rate. However, it also means you don't get a contribution from the government if your wages are lower than the lowest marginal rate (and you’re not paying income tax).
Ben is paid a gross salary of £2,500 every month. He puts 10% (£250) of that salary into his Smart Pension account. Ben’s employer takes his payments from his gross salary before deducting tax. His employer then puts extra money in, equivalent to another 4% (£100). In total, Ben sees a monthly contribution of £350 going into his Smart Pension account – including £50 tax relief.
In this arrangement, contributions are taken after tax and National Insurance have been taken off. In other words, for a low rate taxpayer, 80% of the contribution is taken from the net salary. Another 20% is added to the pension scheme by the pension provider, who then claims that back from HMRC (for a higher rate tax payer, some of the tax relief is claimed back via the tax return). Smart Pension doesn't work this way.
Anna is paid a gross salary of £2,500 every month (we've ignored National Insurance for a moment, to keep this example simple). Anna wants to put 10% of her salary in her workplace pension. To do that, she makes a net contribution of 8% of her gross salary, which is £200 (the 8% equates to 10% minus 20% tax relief).
Her employer then puts extra money in, equivalent to another 4% (£100). The pension provider then adds the 20% basic rate tax relief (£50) and does the work to reclaim that amount from HMRC.
In total, Anna sees a monthly contribution of £350.
In this arrangement, payments are taken from your gross salary before income tax has been deducted. This means you get tax relief via PAYE at the highest marginal rate. You don’t have to claim any tax relief on your wages from HMRC, even if you pay income tax at higher than basic rate. However, it also means you don't get a contribution from the government if your wages are lower than the lowest marginal rate (and you’re not paying income tax).
Ben is paid a gross salary of £2,500 every month. He puts 10% (£250) of that salary into his Smart Pension account. Ben’s employer takes his payments from his gross salary before deducting tax. His employer then puts extra money in, equivalent to another 4% (£100). In total, Ben sees a monthly contribution of £350 going into his Smart Pension account – including £50 tax relief.
In this arrangement, contributions are taken after tax and National Insurance have been taken off. In other words, for a low rate taxpayer, 80% of the contribution is taken from the net salary. Another 20% is added to the pension scheme by the pension provider, who then claims that back from HMRC (for a higher rate tax payer, some of the tax relief is claimed back via the tax return). Smart Pension doesn't work this way.
Anna is paid a gross salary of £2,500 every month (we've ignored National Insurance for a moment, to keep this example simple). Anna wants to put 10% of her salary in her workplace pension. To do that, she makes a net contribution of 8% of her gross salary, which is £200 (the 8% equates to 10% minus 20% tax relief).
Her employer then puts extra money in, equivalent to another 4% (£100). The pension provider then adds the 20% basic rate tax relief (£50) and does the work to reclaim that amount from HMRC.
In total, Anna sees a monthly contribution of £350.
You won’t need to check in on your pension savings every day. They're designed to be a long-term investment. But if you do need or want to get an update, then the secure Smart Pension makes it easy to get that information straight away. There’s no need to make a phone call or to wait for a letter.
Our app will give you real time information about your pension savings. It puts your future into the palm of your hand.
You won’t need to check in on your pension savings every day. They're designed to be a long-term investment. But if you do need or want to get an update, then the secure Smart Pension makes it easy to get that information straight away. There’s no need to make a phone call or to wait for a letter.
Our app will give you real time information about your pension savings. It puts your future into the palm of your hand.
You won’t need to check in on your pension savings every day. They're designed to be a long-term investment. But if you do need or want to get an update, then the secure Smart Pension makes it easy to get that information straight away. There’s no need to make a phone call or to wait for a letter.
Our app will give you real time information about your pension savings. It puts your future into the palm of your hand.
Aims to track the return of the FTSE Actuaries British Government Index Linked All Stocks Index, which features UK government bonds with returns linked to the Retail Price Index (RPI).
Aims to invest in a way which matches the broad characteristics of investments underlying the pricing of a typical non-inflation linked annuity.
Aims to maintain capital and provide a return in-line with money market rates by investing in a range of money market securities denominated in sterling.
This fund has been created so that it will typically suit most of our members who are approaching their target retirement age and would like a lower level of volatility than the smart growth funds.
Aims to track a filtered index, which excludes companies that operate in industries that breach certain ethical criteria.
This fund aims to replicate the asset allocation, performance and risk profile of our Smart Growth Moderate fund, whilst incorporating additionalscreening criteria that revalues the weighting of each investment depending on their Environmental, Social, and Governance (ESG) score. It aims to limit the additional risks associated with ESG factors.
This fund carries a higher risk of fluctuation to your savings but has the potential for high growth, though this is not guaranteed
This fund carries the lowest risk of loss but also reduced likelihood of a high return, but it may be suitable if you are concerned about volatility.
This fund has been created so that it will typically suit most our members, it has the medium level of risk of these funds.
Aims to provide long-term investment growth up to and during retirement, to facilitate the drawdown of retirement income.
This fund has been created so that it will typically suit most of our members who are approaching their target retirement age and would like an even lower level of volatility than the smart growth funds and the de-risking fund.
Aims to track the return of the FTSE World North America Index, which provides broad exposure to companies in the North American equity market.
Aims to invest in different types of bonds, including corporate and government bonds both in the UK and overseas.
Aims to create long term appreciation of capital through investment in a diversified portfolio of securities which meets Islamic investment principles.
Aims to track the return of the FTSE 100 Index, which contains the largest listed companies on the UK stock market.
Aims to track the performance of the FTSE Developed (ex UK) Index, which provides broad exposure to large and mid-cap companies in the developed world, excluding the UK.
Aims to track the return of the FTSE All-World Emerging Index, which provides access to key emerging economies including Brazil, Russia, India and China.