Non-Taxpayer paying too much Into a Pension

Exodi

I think I interpret it that you're not working? It's my understanding that the £40k annual limit applies to contributions from earnings.

The tax relief is intended to be exactly that - relief from the tax paid through PAYE (the logic being that as the income would be taxed when eventually taken out from the pension, it's not fair to be taxed twice on it). It's a bit of a blunt instrument, as it assumes everyone pays the basic rate of tax (whereas some may pay no tax, and be quids in), but it's the best we've got.

You can surely understand why it works this way though? Imagine if a millionaires children, who don't work, were able to have £40k a year from their trust fund put into pensions, and then received £10k of 'tax relief' from taxpayers coffers every year.