UK Pension Annual Allowance 2026/27: 60,000 pounds Limit, Taper and Carry Forward
The pension annual allowance is 60,000 pounds in 2026/27. Learn the tapered allowance for high earners, MPAA, carry forward rules and the annual allowance charge.
What Is the Pension Annual Allowance?
The pension annual allowance (AA) is the maximum amount of pension contributions that can attract tax relief in a single tax year. For 2026/27, the standard annual allowance is £60,000.
The allowance covers all pension input across all pension schemes you belong to:
- Your own personal contributions
- Employer contributions on your behalf
- Salary sacrifice contributions
For defined contribution (DC) pensions, the input is simply the total cash contributions. For defined benefit (DB) pensions, the input is calculated as the annual increase in accrued pension multiplied by a factor of 16, plus any lump sum increases -- the Pension Input Amount (PIA).
If your total pension input exceeds the annual allowance, the excess is subject to the Annual Allowance Charge, effectively removing the tax relief from the excess.
Standard Annual Allowance: £60,000 in 2026/27
The £60,000 standard annual allowance was restored in April 2023 (it had been £40,000 since 2014) and remains unchanged for 2026/27. This is a significant figure that the vast majority of savers will never breach in a single year.
The allowance is also capped at your net relevant earnings -- you cannot contribute more to a pension than you earn and receive tax relief. This is particularly relevant for self-employed people with variable income.
The Tapered Annual Allowance
High earners face a reduced annual allowance, known as the Tapered Annual Allowance (TAA). The taper applies when both of the following income tests are met:
- Threshold Income exceeds £200,000
- Adjusted Income exceeds £260,000
If both tests are met, the annual allowance is reduced by £1 for every £2 of adjusted income above £260,000.
Minimum Tapered Annual Allowance
The tapered annual allowance has a floor: it cannot fall below £10,000, reached when adjusted income hits £360,000.
| Adjusted Income | Tapered Annual Allowance |
|---|---|
| Up to £260,000 | £60,000 (no taper) |
| £280,000 | £50,000 |
| £300,000 | £40,000 |
| £320,000 | £30,000 |
| £340,000 | £20,000 |
| £360,000 or above | £10,000 (minimum) |
Defining the Income Tests
Threshold income = net income (all sources) minus personal pension contributions. It specifically excludes employer pension contributions and salary sacrifice arrangements made from 9 July 2015 onwards. If threshold income is £200,000 or below, the taper does not apply regardless of adjusted income.
Adjusted income = threshold income plus employer pension contributions. This means employer contributions that push your adjusted income above £260,000 can reduce your allowance even if your personal earnings are lower.
Worked Example of the Taper
David is a partner at a law firm. His earnings are £290,000. His employer contributes £30,000 to his pension.
- Threshold income = £290,000 - £10,000 (personal pension contribution) = £280,000 (above £200,000 -- first test met)
- Adjusted income = £280,000 + £30,000 = £310,000 (above £260,000 -- second test met)
Taper reduction = (£310,000 - £260,000) / 2 = £25,000
Tapered annual allowance = £60,000 - £25,000 = £35,000
David's total pension input = £10,000 (personal) + £30,000 (employer) = £40,000. This exceeds his tapered allowance of £35,000 by £5,000.
The £5,000 excess is subject to the Annual Allowance Charge at David's marginal tax rate (45%), costing £2,250.
The Money Purchase Annual Allowance (MPAA)
A separate, much lower allowance applies once you have flexibly accessed your defined contribution pension. "Flexibly accessing" includes:
- Taking income via flexi-access drawdown
- Taking an annuity with certain variable features
- Taking an Uncrystallised Funds Pension Lump Sum (UFPLS)
Once triggered, the Money Purchase Annual Allowance (MPAA) restricts future contributions to defined contribution (money purchase) pensions to just £10,000 per year. The standard allowance or tapered allowance still applies to defined benefit schemes.
The MPAA exists to prevent recycling -- using pension income to make new contributions and claim tax relief again on the same funds.
When Does the MPAA Apply?
The MPAA applies from the day after you first flexibly access your pension. This is an irreversible trigger -- once activated, it cannot be undone.
Taking a tax-free lump sum (pension commencement lump sum) alone does not trigger the MPAA, as long as the remainder is used to purchase a standard lifetime annuity or moved into a capped drawdown arrangement.
Carry Forward: Using Previous Years' Unused Allowance
If your pension contributions in one year are lower than the annual allowance, the unused amount can be carried forward for up to 3 tax years.
Carry Forward Rules
- You must have been a member of a registered pension scheme in each year you carry forward from (you did not need to contribute, just be a member)
- You must use the current year's full annual allowance before using any carry forward
- Carry forward is used in chronological order -- oldest first
- The annual allowance for each historical year applies: £60,000 for 2023/24, 2024/25, and 2025/26
Maximum Carry Forward Available in 2026/27
If you made no pension contributions in 2023/24, 2024/25, or 2025/26, the maximum available carry forward in 2026/27 is:
| Year | Annual Allowance | Unused (if contributions = £0) |
|---|---|---|
| 2023/24 | £60,000 | £60,000 |
| 2024/25 | £60,000 | £60,000 |
| 2025/26 | £60,000 | £60,000 |
| 2026/27 (current year) | £60,000 | -- |
Total available = £60,000 (current) + £60,000 x 3 (carry forward) = £240,000
However, you still cannot exceed your net relevant earnings in a single year. A person earning £150,000 in 2026/27 cannot use the full £240,000 carry forward.
Practical Use of Carry Forward
Carry forward is particularly valuable for:
- Business owners who sell a business and receive a large capital sum
- Executives who receive a large bonus in one year
- People who have recently become high earners and want to "catch up" on pension saving
The Annual Allowance Charge
If your total pension input exceeds your available annual allowance (including any carry forward), the excess is added to your taxable income for the year and taxed at your marginal rate. This is the Annual Allowance Charge.
The charge is reported and paid through Self Assessment. If the charge exceeds £2,000, you may be able to use the Scheme Pays facility, where you ask your pension scheme to pay the charge on your behalf in exchange for a reduction in your pension benefits.
Defined Benefit Pensions and the Annual Allowance
For DB pensions, calculating pension input is more complex. The Pension Input Amount is calculated as:
(Closing pension value x 16) + (closing lump sum) - (opening pension value x 16) - (opening lump sum)
Where the opening value is the pension accrued at the start of the pension input period, revalued by CPI (or scheme rules if higher).
Large final salary increases can create unexpectedly high pension input amounts that breach the annual allowance without any cash being paid in. This is a risk particularly for senior public sector workers (NHS consultants, senior civil servants, senior teachers) whose salary rises near retirement can generate large DB pension inputs.
Interaction with the Lifetime Allowance
The Lifetime Allowance (the cap on total pension savings attracting tax relief) was abolished in April 2024. There is no longer a tax charge for exceeding a total pension fund limit. The annual allowance remains the only ongoing contribution limit.
Summary
The pension annual allowance for 2026/27 is £60,000. High earners above £260,000 adjusted income face a tapered reduction down to a minimum of £10,000. Carry forward allows unused allowances from the past 3 years to be used in the current year. If you flexibly access your pension, the MPAA reduces your DC contribution limit to £10,000 permanently. Breaching the allowance triggers a charge at your marginal tax rate, which can be significant for additional rate taxpayers.
Frequently asked questions
What is the pension annual allowance for 2026/27?
The standard annual allowance is 60,000 pounds for 2026/27. This is the maximum amount of pension contributions (from all sources) that can benefit from tax relief in a single tax year.
What is the tapered annual allowance and who does it affect?
High earners with adjusted income above 260,000 pounds face a reduced tapered annual allowance. For every 2 pounds of adjusted income above 260,000 pounds, the annual allowance reduces by 1 pound, down to a minimum tapered allowance of 10,000 pounds.
What is carry forward and how does it work?
Carry forward allows you to use unused annual allowance from the previous 3 tax years, provided you were a member of a registered pension scheme in those years. This means you could potentially contribute up to 200,000 pounds (60,000 for 2026/27 plus up to 60,000 from each of the previous 3 years) in a single year, subject to having sufficient earnings.
In-depth guides
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