5 ways to make the most of your pension before the tax year ends
With the end of the 2025/26 tax year on 5 April just a few weeks away, now is the perfect time to review your pension and explore ways to make it work harder for you.
Boosting your retirement savings now can have long-term benefits, including tax advantages and greater financial security in later life. Here are five practical steps to consider taking in the next few weeks.
- Check how much of your Annual Allowance you’ve used – can you boost your contributions?
One of the simplest ways to give your pension a boost is to increase your contributions, as long as you don’t exceed your Annual Allowance. This is the amount you can pay into your pension and benefit from tax relief. For the 2025/26 tax year, it is £60,000 or 100% of your earnings, whichever is lower.
If you top up your pension, tax relief can make a big difference. For example, a £100 contribution could cost a basic rate taxpayer just £80. Higher-rate and additional rate taxpayers benefit even more, paying only £60 and £55 respectively once all tax relief is claimed.
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- Make use of ‘carry forward’ rules
If you haven’t used your full pension allowance in the past three years, you may be able to take advantage of the ‘carry forward’ rule. This allows you to contribute more than the current annual allowance by using unused allowances from previous years.
For example, if you didn’t make contributions in previous years and you can afford to do so, you could potentially contribute far more than £60,000 in the current tax year, maximising both your pension pot and tax relief.
- Consider using ISAs to supplement your retirement savings
If you plan to retire before State Pension age, and before you can access your workplace or personal pensions, it’s worth exploring savings options that can be accessed at any time.
Tax-efficient Individual Savings Accounts (ISAs) are a good option, as returns are free from income tax and Capital Gains Tax (CGT). For 2025/26, you can contribute up to £20,000 into ISAs, which resets with the new tax year on 6 April. ISA allowances don’t roll over, so any unused portion disappears once the tax year ends on 5 April.
Planning ahead is especially important if you’re under 65, because the cash ISA limit drops to £12,000 from April 2027. Using your full allowance this year ensures you don’t miss out on valuable tax-free growth.
- Time your final drawdown payment carefully
If you’re using flexible drawdown to take an income from your pension, timing your last payment of the tax year is crucial. Make sure it reaches your account before 5 April, or you might unintentionally push some income into the next tax year and pay more tax than necessary.
For example, if you normally take £1,000 a month, ensuring you receive your final payment before 5 April means the total £12,000 withdrawn over the year stays within your personal allowance of £12,570. But if that last £1,000 lands after 5 April, part of your tax-free allowance is effectively lost for the current tax year, which could increase your tax bill. Properly timing your withdrawals ensures you make full use of your allowance and avoid paying extra unnecessarily.
- Protect your investments using “Bed & Pension”
Even if you don’t have spare cash available to top up your pension, you may hold investments outside a tax-protected wrapper that could benefit from sheltering. With dividend allowances reduced to just £500 and CGT exemptions cut to £3,000, moving assets into a pension has become increasingly appealing, provided you’re comfortable locking the money away until retirement.
The “Bed & Pension” strategy allows you to sell shares or funds held outside your pension, use any remaining CGT allowance, and then repurchase them within a pension, such as a Self-Invested Personal Pension (SIPP). Once inside a pension, future growth is free from income tax and CGT.
While you may incur CGT on any gains above your allowance when selling, the long-term benefit of sheltering future returns inside a pension can be significant.
Remember, pension and tax rules can be complex. If you need help or want personalised advice, it’s wise to seek help from an independent financial adviser who can explain the best options for you.