Contributions and tax
Paying into a pension is not just about how much you contribute. The Plan booklet tells you how much you and M&S will contribute. If you want to change the amount you pay please complete the Change your contributions or pensions level form. You will also get tax relief from the government on anything you pay in. All of this means that it’s easier than you think to build up your savings.
Your contributions can be deducted in two different ways, these are known as ‘net pay’ and ‘salary sacrifice’.
M&S will take your regular contribution from your salary before tax and pass them on to us, along with any additional amount that they’re paying in for you.
This means that you’ll benefit from full tax relief straight away.
If you don’t pay income tax because your earnings are below the income tax threshold, you will not benefit from the tax relief that a taxpayer would receive.
M&S will automatically put you into salary exchange after 2 months’ membership. This means you will pay your contributions by ‘salary sacrifice’, i.e. by giving up part of your salary in return for an increased pension contribution from M&S. By doing this your contribution is taken from your pay before tax, so you benefit from full tax relief straight away, and you save National Insurance too.
The salary exchange factsheet gives you more information and explains why some people at certain times aren’t put into salary exchange.
Use Legal & General's salary sacrifice calculator to see how you could benefit.
When you’re thinking of how much to contribute, you should bear in mind that there is a limited amount you can pay without incurring a tax charge.
Generally, you can pay in the equivalent of your entire annual salary each year (or if your salary is less than £3,600 you can pay up to £3,600) and get tax relief. However, the government has put in place an annual allowance which includes any money that you pay in and any money that an employer pays in on your behalf, to this plan or any other pension plans you may have. If you exceed the annual allowance you will pay tax on any amount paid above it.
These allowances can change with each new tax year, depending on what the Government sets out. Legal & General's Tax Year Rates and Allowances booklet will keep you up to date on what these allowances are, and how they could affect you.
If you’re a higher earner, please see tax information for higher earners to understand your options.