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Tax relief benefits

Tax relief helps your pension grow

One of the best things about saving into a workplace pension is the tax relief you’ll benefit from. For every pound you contribute to your Nest pension, we will reclaim 20p from the government on your behalf. We then add this extra money to your pension pot.

It's one of the reasons saving into a workplace pension like Nest can be such a good idea.

The tax relief we reclaim for you is set at 20 per cent, which is the basic rate of tax you pay on your earnings. So instead of this money going to the government, it goes into your pension pot for you – growing over time. 

And because this is worked out as a percentage, the more you contribute the more we can claim back for you. 

For a lot of people, we will reclaim all of the tax for them and they don’t need to do a thing.

For higher rate tax payers – people who pay some of their tax at 40 per cent in England or 41% in Scotland – we can reclaim the basic 20 per cent relief. For the other 20 per cent, you will need to reclaim this by asking HMRC to change your tax code (or completing your own Self Assessment tax return form).

It takes three months for this extra money to be added to your Nest account.

The tax relief on pensions applies to the regular contributions you make from your salary as well as any additional ‘top up’ payments.

This means if you increase your voluntary contributions above the minimum (5% in 2018, 8% in 2019) then you will benefit even more from the tax relief – but not from any additional employer contributions.

No, these are different benefits. The ‘25% tax-free allowance’ applies to a lump sum you withdraw from your pension pot.

Income tax rates

It's important to understand which tax bracket applies to you. All taxpayers get 20% tax relief on their contributions - however, higher rate taxpayers can receive an additional 20% that they have to apply for. This tax relief is not paid into the fund, but rather goes directly to the taxpayer.

Last updated: 08/20

Not sure where you stand?

If you’d like to get a better idea of your current pension situation and what you can do to work towards the retirement you want, take Nest’s Three Step Pension Check.

Take your Three Step Pension Check