Contributing to a company or personal pension has long been one of the most powerful and tax-efficient ways to build retirement savings. Thanks to auto-enrolment, both employees and employers are required to contribute in most situations. However, as a self-employed law firm partner, you may now have greater earning power but also more responsibility for your own financial future. 

Without structured oversight, your pension could become underfunded, overlooked or misaligned with your long-term retirement goals. 

Are You Missing Out on Tax Relief?

Pensions offer tax relief on contributions at your highest marginal rate, which means every pound invested is more efficient than saving into most other vehicles. As a higher-rate or additional-rate taxpayer, you can significantly reduce your tax burden, but only if you structure your contributions correctly. 

Ever-Changing Pension Rules: Know the Limits

With the recent removal of the Lifetime Allowance (LTA), attention now turns to two other key limits: 

• Annual Allowance – Capped at £60,000 per year. 

• Tapered Annual Allowance – For the 2023/24 tax year, if your threshold income exceeds £260,000, your annual allowance reduces by £1 for every £2 your adjusted income exceeds that threshold. The minimum tapered allowance is £10,000. 

Understanding your threshold and adjusted income can be complex, particularly when your final earnings may not be clear until the end of the tax year. Poor planning here could mean missed tax relief or unexpected penalties. 

Are You Using Carry Forward?

HMRC allows you to carry forward unused annual allowance from the past three tax years. This gives you the opportunity to “catch up” on missed contributions and maximise your current-year tax relief. Yet, few partners take full advantage. 

Early Partnership Years: Critical Pension Window

Once your earnings rise significantly, pension flexibility decreases due to tapering. That’s why the early years of partnership, before you hit certain thresholds, are the ideal time to front-load contributions. The key questions to ask: 

• Are you contributing the maximum allowable amount each year? 

• Is your pension invested appropriately for long-term growth? 

• If your contributions are capped, how else will you build your retirement savings gap? 

Partnering with a financial planner ensures that your pension contributions remain optimised, compliant and aligned to your broader retirement vision. 

FAQs 

Q: How much can I contribute to my pension as a law firm partner?
A: You can contribute up to £60,000 per year tax-efficiently, but this may be reduced by tapering if your income exceeds certain thresholds. You may also use carry-forward allowances from previous years. 

Q: What happens if I exceed my annual pension allowance?
A: Any excess contribution may be taxed at your marginal income tax rate unless you have unused allowances from prior years. 

Q: Should I front-load contributions early in partnership?
A: Yes, this is often the most flexible period before tapering restrictions begin. Early contributions can maximise tax relief. 

Q: What should I do if my annual allowance is reduced due to tapering?
A: You may need to explore additional investment vehicles outside your pension to meet your long-term savings needs. 

If you’d like to understand how to optimise your pension contributions and create a tailored long-term retirement strategy, we’d be happy to help. Book a 15-minute call, free of charge, to speak with one of our financial advisers. 

Adrian Johnson