How many pensions can I have?

How many pensions can I have?

There is no limit to the amount of pensions you can possess. There is, however, annual and lifetime caps on the amount you are allowed to pay into your pensions whilst claiming tax relief – £40,000 and £1,073,100, respectively for the 2020 to 21 tax year. These limits can vary based upon your personal circumstances.

How many personal pensions am I allowed to have?

A personal pension is one that you can set up yourself, and is pretty common amongst those who are self-employed. Personal pensions tend to include the SIPP (Self Invested Personal Pension).

There Is no cap on the amount of personal pensions you are able to set up and you can contribute into more than one personal pension at any one time.

How many workplace pensions can I have?

Workplace pensions are set up by your employer. Ever since employers have been required by the government to automatically enrol employees into a workplace pension scheme from 2018, the amount of workplace pensions people are now picking up during their careers has rocketed.

During a chat with an Independent financial advisor near me, I was told that there’s no limit to the number of workplace pensions you are allowed. However, you are only able to pay into one workplace pension at any one time. All your other workplace pensions must remain dormant.

How many stakeholder pensions can I have?

stakeholder pensions can be set up by anyone, either for themselves or for others. It was first introduced primarily for those who perhaps don’t meet the standard criteria of other pension schemes, such as the self-employed or low income workers.

There isn’t a limit to the amount of stakeholder pensions you can own and you are able to pay into several stakeholder pensions at a time.

How much can I pay into a pension whilst receiving tax relief?

So long as you are an eligible tax-payer, the government will give tax relief on your pension contributions. This work as either a tax top-up or a tax refund, dependent on how you pay your contributions. In both cases, the government contributes extra towards your pension, in effect. But they will only do so up to a certain point, so you should keep this in mind.

What is my annual pension allowance?

The annual pension allowance is effectively the capped amount you can pay into your pension each year whilst claiming tax relief. For the 2020/21 tax year, you are able to pay in 100% of your salary or up to £40,000 – whichever is lowest. This is applicable to all types of pensions.

This limit will change if you earn a low salary or you have already started withdrawing from your pension.

What is my lifetime pension allowance?

Lifetime pension allowance is the capped amount you can receive from your pension without having to pay a penalty. Therefore, you shouldn’t pay more than this amount into a pension throughout your lifetime.

For the 2020/21 tax year, the lifetime pension allowance is set at £1,073,100. It applies to every form of pension.

If I have more than one pension, what are the downsides?

If you have worked more than 1 job in your lifetime, it is pretty much inevitable that you will have more than 1 pension, due to the new pension auto-enrolment rules. This won’t be an issue for a lot of people, however, there are big downsides:

  • You could end up having to pay more in fees than you should, especially since fees can vary greatly between providers.
  • Every pension plan carries a different strategy for investment, therefore having multiple pensions can reduce the overall effectiveness of each pension.
  • Tracking and managing the performance of several pensions is very time consuming and generally inefficient, and you could lose track of your older pensions as time moves on.

Should I combine multiple pensions into one?

It is much simpler to manage a single. The fees you pay will more transparent and easier for you to follow and understand. You will also be able to pick a pension plan that is best suited to your goals. However, you will first want to check through your existing pensions to see if you would lose any benefits if you were to transfer them to another provider.