Top tips for pension tax planning Taxpayers should maximise their pension contributions to make the most of personal allowances in the run-up to the end of the tax year, say experts. "A pension has always been a useful tax-efficient wrapper and with the removal of the requirement to purchase annuities they may now be even more attractive," says Martin Tilley, director of technical services at Dentons Pension Management. He says that with reductions to tax rates due to come in this year, and the annual allowance and lifetime allowance limits falling next year, its time for people to assess their retirement provisions. Here, Tilley tells Money Matters readers his top tips for pensions. Additional rate taxpayers For the additional rate taxpayers, relief of up to 50 per cent can be achieved on contributions made before April 5. Additional rate tax reduces to 45 per cent from April 6, so there is limited time to benefit from the higher level. Higher rate taxpayer For higher rate taxpayers, a further band exists between £100,000 and around £116,210 where personal allowances are eroded and an effective tax rate of 60 per cent applies. Reducing taxable earnings to below this level can have obvious savings. The reducing annual allowance A contribution of up to £50,000 can be paid into a pension in this and the next tax year, but the contribution limit (the annual allowance) will drop from April 6 2014 to just £40,000. Carry forward relief For those who plan to exceed the £50,000 limit this year, there is scope to use carry forward relief from any of the preceding three tax years. Provided the taxpayer was a member of a registered pension scheme during the previous tax years in question, and where less than the full £50,000 was previously paid, any underpayment can be carried into the current tax year. In exceptional circumstances, £200,000 could be contributed using the current and previous year's allowances. Use next year's allowance Another option, where carry forward may have already been used, or is unavailable, is to bring forward next year's annual allowance, into the current year. This can be done by changing your pension scheme's pension input period. Approval to do this will be required from the scheme provider, however. Protect your lifetime allowance It is not just in the accumulation stage of a pension where contribution management is necessary. Individuals whose funds might be approaching, or will be above, the new 2014 lifetime allowance of £1.25m might consider seeking the permitted protection from this new lower level. Once protection has been put in place, no further contributions can be made, so the current and next tax years are the last in which contributions can be considered. Thinking about flexible drawdown? For people with fixed pension income of £20,000 a year or more, the opportunity to draw future income under flexible drawdown exists. However, someone electing to use flexible drawdown is not permitted to contribute during the tax year in which it is initiated. Thus, this tax year will offer the last opportunity to contribute if flexible drawdown is to be used next tax year.