Every time you add money to your pension the government refunds the amount of income tax you have paid. This is effectively a cash-back incentive and can make a significant difference to the size of your savings pot. As with most tax benefits, there is a limit; it’s pretty generous, though.
Tax breaks in your pension
As well as tax relief, there are other tax breaks that mean you get more out of your money with a pension compared with most other savings tools. For example, the money you add to your pension is not taxed. And once your contributions are invested, they grow largely free of taxes, too.