Stay at home parents, who are currently out of employment whilst raising a young family, can still contribute to a pension to the tune of £2,880 per year and receive 20% tax relief – the government will also top this amount up by £720, which makes the maximum contribution £3,600 gross, although greater contributions are possible without further tax relief.

If you do make pension contributions in these circumstances, then return to work at a later date, it is likely that you will benefit from a larger pension allowance due to ‘carry-forward’ rules, however, unused tax relief on pension contributions cannot be carried forward and are lost at the end of each tax year.

The £3,600 non-earner’s annual allowance was introduced in 2002 with the aim of allowing non-earners and low-earners the ability to build a retirement fund, however, the opportunity to benefit from £720 of up front tax relief should not be overlooked and, with the right structure in place, 25% of the pot can be withdrawn tax free and, for some individuals, the retirement income withdrawals may also be tax free.

For anyone who has recently stopped working, and who were paying into a pension scheme, there maybe be up to four years’ unused annual allowance available for the period 2014 through to 2018. This equates to £160,000, however, it is not possible to make contributions for a tax year other than the one you are in.

Here at The Financial Planning Group, our aim is to change the fundamental relationship people have with your money, and to give you confidence and clarity in your own future.

If you would like to find out more please call 0800 731 7614 and ask to speak to either Tim or Alan and they will be happy to arrange a meeting in their offices in the heart of Teddington.

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