Tax

Pensions are a tax effective way to save.

When you save into a pension from your pay, you can get tax relief on the money you put in. This means you do not pay Income Tax on the money you pay into your pension. You can also save on National Insurance by making your 5% contribution from your pay or extra contributions through salary sacrifice.

How much you save on tax and National Insurance depends on how you save into the Fund.

  • The 5% you save from your pay for your DB Career Average pension can save you Income Tax and National Insurance.
  • Variable extra voluntary contributions (regular or one off payments), will save you Income Tax. This will go into your pension pot.
  • Fixed extra variable contributions you set up can save you Income Tax and National Insurance. This will go into your pension pot.

Find out more about making extra pension savings

You will only get tax relief on pension savings up to the value of your total earnings for that tax year.

Unilever will not let you save more than your Unilever earnings. They will check this amount to make sure that you are not saving more than you earn.

Unilever also limits how much you can save via salary sacrifice to make sure that your pay doesn’t drop below the minimum wage.

Tax limits on your pension savings

It’s important to be aware of a tax allowance that applies to pension savings, especially if you’re a high earner.

Annual allowance

The government sets a limit on the amount of pension savings you can build up each year without having to pay a tax charge. For most people this is currently £60,000 per tax year. It may be lower if you are a higher earner, or if you have taken cash or drawdown from a defined contribution pension scheme.

Pension savings that count towards the annual allowance:

  • For your DB Career Average Plan pension, and any Final Salary Plan pension, it is the amount calculated based on your pension at the start and end of the tax year
  • If you stopped building up DB Career Average Plan pension at any point in the past then your Final Salary Plan pension will not be included in this calculation
  • For your DC Investing Plan it is the amount of money paid into your account by both you and Unilever
  • For any other pensions you may have it is money paid in by you or anyone else

This calculation is set out in law.

If you go over the annual allowance, you’ll have to pay a tax charge on any pension savings that you make over this limit.

You are responsible for checking that your pension savings over a tax year do not go over the annual allowance.

We will let you know if your pension savings with Unilever go over £60,000.

More on the annual allowance

You can generally carry forward unused annual allowance from 3 previous tax years. The amount you can carry forward will change from year to year. This is because the value of the annual allowance has changed over the years. It can also be reduced if you earn above a certain amount. This means you need to check what annual allowance applied to you and how much of it was unused in each previous tax year when working out how much you can carry forward.

How carry forward works

If you do need to pay tax on pension savings you have made over the annual allowance, you should contact the Unilever Pensions Team by email at unileverpensionsteam@capita.co.uk or by calling 0800 028 0051 or +44 (0)1473 622 307 if outside the UK.

Tapered annual allowance - elderly couple sat at table looking at mobile phone

Tapered annual allowance

The annual allowance is reduced for very high earners. If your annual allowance is reduced you have what is known as a ‘tapered annual allowance’. The tapered annual allowance may affect you if your income is high in a tax year (for example if you get a large lump sum due to redundancy).

Your annual allowance may be reduced if:

  • Your taxable income (ignoring any salary sacrifice) plus your Benefits Envelope is over £200,000 and
  • Your taxable income plus money paid in to your pension (including by your employer) is over £260,000

If the tapered annual allowance does apply to you, your annual allowance will reduce by £1 for every £2 you are over the £260,000 limit. The lowest your annual allowance can reduce to is £10,000.

Working out your tapered annual allowance can be complicated, so you might want to get financial advice.

Tapered annual allowance

Money purchase annual allowance - Elderly grandparent in garden with grandson

Money Purchase Annual Allowance

If you start taking money from the DC Investing Plan or another similar pension scheme where your money is invested in your own pot, your annual allowance might reduce. The reduced annual allowance is called the money purchase annual allowance and is currently £10,000 a year. It applies to savings you make into defined contribution pension arrangements, like the DC Investing Plan. You’ll be told when you take the money if the money purchase annual allowance applies to you.

Find out more about the money purchase annual allowance

Tax limits on money paid out

As you get tax relief on the money you save into your pension, the benefits paid from the pension are usually taxable as income.

When you retire you can choose to take some of your pension savings (up to 25%) as tax-free cash.

The maximum tax-free cash that you can take from all of your pension savings is normally limited to £268,275. If you can and you choose to take any cash after that it is likely to be taxed as income.

There is also a limit on the total tax-free cash lump sums that can be paid from all of your pension savings if you retire with serious ill-health, and/or to your loved ones when you die. For most members this limit is £1,073,100. This limit includes any tax-free cash taken at retirement. Any cash taken above £1,073,100 is likely to be taxed as income.

Cash lump sums paid if you die after age 75 or that are paid more than 2 years after we were told about your death are taxable as income.

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