Pension Annual Allowance 2026/27: Rules, Taper and Carry Forward
The pension annual allowance is the maximum you can contribute to all your pensions in a tax year while still getting tax relief. Getting it right can mean thousands of pounds difference in your retirement pot.
What is the pension annual allowance?
The annual allowance (AA) is the maximum total pension contribution from you and your employer combined that can receive tax relief in a single tax year. For 2026/27 the standard annual allowance is £60,000.
If you exceed the annual allowance, the excess is added to your taxable income and charged at your marginal rate. This is known as the annual allowance charge. It effectively claws back the tax relief you received on the excess contributions.
The annual allowance was increased in April 2023
The standard AA was £40,000 from 2014/15 to 2022/23. It was increased to £60,000 from 6 April 2023 (tax year 2023/24 onwards). At the same time, the lifetime allowance was abolished from April 2024. This means higher earners and those making large contributions have significantly more flexibility than before.
What counts towards the annual allowance?
All pension input counts toward the annual allowance, not just your own contributions:
- Your contributions: both personal contributions and salary sacrifice amounts
- Employer contributions: including mandatory auto-enrolment contributions and any voluntary top-ups from your employer
- Contributions to all pension schemes. If you have multiple pensions (a workplace scheme and a personal SIPP, for example), all contributions count together
For defined benefit (final salary) schemes, the pension input is calculated differently: HMRC multiplies the annual increase in your accrued pension by a factor of 16, plus any lump sum increase. This can produce surprisingly large pension input figures for those with generous DB schemes.
Carry forward: using unused allowance from previous years
If you have not used your full annual allowance in the previous three tax years, you can carry the unused amounts forward and use them in the current year. This is particularly useful if you have received a large bonus, sold a business, or want to make a large one-off pension contribution.
| Tax year | Standard AA | Example: used | Unused (carries forward) |
|---|---|---|---|
| 2022/23 | £40,000 | £15,000 | £25,000 |
| 2023/24 | £60,000 | £20,000 | £40,000 |
| 2024/25 | £60,000 | £18,000 | £42,000 |
| 2026/27 (current) | £60,000 | — | Max this year: £60,000 + £107,000 = £167,000 |
To use carry forward you must have been a member of a registered pension scheme during the year whose unused allowance you're carrying forward. You don't have to have made contributions in those years, just been a member. You must also have sufficient UK earnings in the current year (pension contributions with tax relief are limited to 100% of your annual earnings).
Tapered annual allowance for high earners
If your income is above certain thresholds, your annual allowance is reduced. The taper reduces the AA by £1 for every £2 of income above the threshold, down to a minimum of £10,000.
| Threshold | Amount (2026/27) | What it means |
|---|---|---|
| Threshold income | £200,000 | If your income (before pension contributions) is below this, the taper does not apply regardless of adjusted income. |
| Adjusted income | £260,000 | Income including all pension inputs. The taper starts when this exceeds £260,000. |
| Minimum tapered AA | £10,000 | Reached when adjusted income exceeds £360,000. |
Example: if your adjusted income is £300,000, your AA is reduced by (£300,000 - £260,000) / 2 = £20,000. Your tapered AA is £60,000 - £20,000 = £40,000.
If you think the taper might affect you, consider making large pension contributions through salary sacrifice (which reduces both threshold and adjusted income) or seeking advice from a financial planner.
Money Purchase Annual Allowance (MPAA)
Once you have accessed a defined contribution pension flexibly (for example by taking income drawdown, or cashing in a flexi-access drawdown fund), the Money Purchase Annual Allowance applies to future money purchase contributions. For 2026/27 the MPAA is £10,000.
The MPAA exists to prevent people from recycling taxed income back into a pension to claim relief again. It does not limit contributions to defined benefit (final salary) schemes, so if you have both a DB and a DC pension the interaction can be complex.
Taking pension cash can limit future contributions
The MPAA is triggered the moment you access your pension flexibly, even taking a small amount of drawdown income or cashing in a small pot. Once triggered it cannot be reversed. If you are still working and contributing to a pension, think carefully before accessing your pot early. Taking a tax-free cash lump sum from an annuity does NOT trigger the MPAA.
Salary sacrifice and the annual allowance
Pension salary sacrifice counts as an employer contribution for annual allowance purposes. This matters because salary sacrifice reduces your taxable income, which can help you avoid the tapered annual allowance or the personal allowance taper at £100,000.
For example, if you earn £210,000 and are close to the threshold income limit, sacrificing £15,000 into your pension through salary sacrifice reduces your threshold income to £195,000, keeping you below the £200,000 point at which tapering starts to apply.
How to check your pension inputs and annual allowance usage
Your pension scheme administrator must provide you with a pension savings statement if your pension input in any scheme exceeds the annual allowance, or on request. For defined benefit schemes you can ask for a pension input statement from the scheme. Your SIPP provider will show contributions in your account.
HMRC's website allows you to check your annual allowance usage and any carry forward available through your Personal Tax Account at gov.uk/check-annual-allowance.