Helping with a query about contributions to a retirement pot and what you are entitled to
Thursday 28 Jul 2022 Author: Tom Selby

If I receive the state pension and have no other earnings, is it possible to pay money into a private pension and receive tax relief? Does the state pension count as earnings for tax relief?


Tom Selby, AJ Bell Head of Retirement Policy says:

Provided you are aged below 75 and a UK resident, you are entitled to pay into a pension and receive tax relief on your contributions.

The amount you can personally contribute each year and receive tax relief is limited to 100% of your ‘relevant earnings’ (we’ll come back to this). So, if your relevant earnings are £30,000, then you can contribute up to £30,000 to a pension (inclusive of tax relief).

There is also an overall annual limit on contributions you can make in a tax year (the ‘annual allowance’) set at £40,000. This limit includes personal contributions, employer contributions and tax relief.

Your annual allowance will be lower than £40,000 if you have flexibly accessed taxable income from your pension. This triggers the ‘money purchase annual allowance’, reducing the amount you can contribute each year to £4,000.

Your annual allowance could also be lower if you have very high earnings and are affected by the annual allowance ‘taper’. You can read more about how the taper works here.


Firstly, let’s tackle the question of what counts as relevant earnings for the purposes of tax-relievable pension contributions.

Relevant earnings in this context includes employment income (things like salary, bonuses and commission), any redundancy payments over the £30,000 tax exempt threshold and taxable ‘benefits in kind’.

Relevant earnings does not include income from a buy-to-let property or pensions, either state or private.

However, if you don’t have earnings deemed ‘relevant’ by HMRC, provided you are under 75 and a UK resident you can still contribute up to £3,600, inclusive of tax relief, to a pension each year.

There are no rules dictating where this contribution can or can’t come from, so if all you have is state pension income then you can contribute this to a pension and benefit from basic-rate tax relief.

In terms of the mechanics, if you paid £80 of state pension income into a SIPP, this would be topped up to £100 automatically by basic-rate tax relief. You could then access the money as and when you wish, with 25% available tax-free and the rest taxed in the same way as income.

This means you could pay a maximum of £2,880 into a SIPP personally, with the remaining £720 coming via upfront tax relief.


Send an email to with the words ‘Retirement question’ in the subject line. We’ll do our best to respond in a future edition of Shares.

Please note, we only provide information and we do not provide financial advice. If you’re unsure please consult a suitably qualified financial adviser. We cannot comment on individual investment portfolios.

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