Benefits of making a one-off pension contribution

Making a one-off pension contribution, if your budget allows, could get you closer to achieving your pension savings goals. A pension is one of the most tax-efficient ways to save for your future and retirement, so let's take a look at the key benefits of making a contribution:

Tax relief

The Government encourages saving into a pension, by giving an incentive known as tax relief. You can take advantage of this by making a one-off contribution to power up your pension.

For example:

You pay Tax relief added as a boost to your contribution Total contribution added to your pension plan
£80 £20 £100
£160 £40 £200
£240 £60 £300

If you pay a rate higher than basic rate of tax you could benefit from additional tax relief.

If you’re in a workplace scheme and it’s set up as a salary exchange scheme, you don’t need to claim any additional tax relief back for regular pension contributions as you’ll already get the full tax saving. But you should ask your employer what happens if you make a one-off pension contribution as you might need to claim the additional tax relief back for that.

If your workplace pension isn’t set up as a salary exchange scheme then you’ll need to claim any additional tax relief back from HM Revenue & Customs (HMRC). You can do this in your tax return or by phoning HMRC.

If you're saving into a workplace scheme there's also bonus exchange or bonus sacrifice. If you're paid a bonus you could decide to pay some or all of it into your pension. You won't pay tax or National Insurance on the bonus amount you choose to exchange for a pension contribution. You can find out more about this and salary exchange by reading our article or your employer may be able to help with next steps.

If you pay into an individual pension or a workplace pension, and your contribution is taken after tax has been paid, then you’ll need to claim any additional tax relief from HMRC.

Remember, tax relief depends on where you live in the UK and your individual circumstances, and could change in the future.

Make the most of your annual allowance

There's a limit to how much you can pay into your pension every year without a tax charge applying. This is called the annual allowance. If, like most people, you haven't exceeded these limits you can make use of the tax incentives on your pension by paying a one-off pension contribution or increasing your regular contributions.

If you're a very high earner then there's also something called the tapered annual allowance. You can find out more about this in our Understanding pension tax relief and annual allowance article.

Let's break down how annual allowance works:

  • The annual allowance for 2024/25 is £60,000.
  • The carry forward rule: if you have any unused allowance from the previous three tax years, you can carry forward the allowance for this tax year.
  • But if you're an employee then you would still need to have the earnings to make a large contribution. For example, to pay in £60,000 you would need to be earning £60,000.
  • If you haven’t used up your annual allowance for the current or last three tax years, you can contribute more with a one-off payment.

There are other limits depending on your individual circumstances, so it’s worth checking our Pension allowances explained article to make sure you're within the rules.

The end of the tax year is 5 April. If you want to make a one-off contribution to your Royal London plan, and your budget allows, you need to be sure the funds are with us by 6pm on Friday 4 April 2025 for it to count towards this tax year. If we receive your contribution after then, it will be added to your plan and applied against your annual allowance for the next tax year. Don't forget, you can make one-off contribution to your plan and increase your regular contributions at any time throughout the year.

Help reach your retirement goals faster

Any one-off contributions you make are added to your pension savings and invested to help them grow, and with the added benefit of tax relief, it's helping you save more for your retirement.

While your savings could grow, their value can also go down, as investment returns aren’t guaranteed. This means you could get back less than you put into your plan.

Your pension savings may get an extra boost from ProfitShare

We aim to give your pension savings an extra boost by adding a share of our profits to your plan each year. We call this ProfitShare.

We can't guarantee we'll be able to award ProfitShare every year. If we do, we add your ProfitShare award to your plan in April, and invest it in the same investment choice as your other pension savings.

ProfitShare is based on the value of the pension savings you have invested with us on the date it's awarded. So if you make a one-off contribution in that tax year it'll increase your fund value, but investment performance will dictate what it looks like when ProfitShare is awarded.

You can take the value of it with the rest of your pension savings any time after age 55. This will increase to age 57 from April 2028. ProfitShare doesn't count as a contribution, so it doesn't affect your annual allowance and the contributions you can make to your plan each year.

Find out more about how it works, how you qualify, and what to expect from ProfitShare.

Make a one-off contribution into your pension

Depending on the type of plan you have, you can make a one-off contribution using our online form. But, if you have a workplace pension plan and you want to exchange a bonus for a pension contribution, your employer may be able to help with next steps.