Pension Annual Allowance UK 2026/27: £60k, Taper & MPAA
The annual allowance is the cap on how much you can pay into pensions each year while still getting tax relief — and getting it wrong can trigger a tax charge that wipes out the very relief you were chasing. This guide explains the rules for 2026/27: the £60,000 standard allowance, the tapered annual allowance that cuts it for high earners once threshold income tops £200,000 and adjusted income tops £260,000, the £10,000 Money Purchase Annual Allowance that bites once you flexibly access a pension, and how carry forward lets you mop up unused allowance from the previous three years. Worked examples show how the taper and carry forward play out for high earners.
The annual allowance is the maximum total pension input — your contributions, your employer's, salary sacrifice, third-party payments and the tax relief — that can be paid in each tax year with tax relief. In 2026/27 the standard allowance is £60,000, applied across all your pensions combined.
Separately, your personal contributions are capped at 100% of your relevant UK earnings (or £3,600 gross if you earn less). So although the allowance is £60,000, you can only personally contribute up to what you earn and still get relief — the higher figure usually only matters when an employer is contributing too.
The Tapered Annual Allowance
High earners face a reduced allowance. The taper is triggered only when both tests are met: threshold income above £200,000 and adjusted income above £260,000.
Once both are crossed, the £60,000 allowance is cut by £1 for every £2 of adjusted income over £260,000, down to a floor of £10,000 — reached at £360,000 of adjusted income. Roughly: threshold income is taxable income less your personal pension contributions; adjusted income adds back employer contributions.
Because the £200,000 threshold-income gate uses income after personal contributions, a well-judged personal contribution can sometimes drop you under £200,000 and restore the full £60,000 allowance.
The £10,000 Money Purchase Annual Allowance
Once you flexibly access a defined contribution pension — typically by drawing taxable income from drawdown or taking a flexible lump sum beyond the tax-free part — the Money Purchase Annual Allowance (MPAA) of £10,000 applies to any further money purchase contributions.
Crucially, you cannot use carry forward against money purchase contributions once the MPAA applies. Taking only your 25% tax-free cash, or buying a lifetime annuity, does notnormally trigger the MPAA — it is taking taxable flexible income that does. Anyone planning to keep working and contributing should think carefully before triggering it.
Carry Forward
Carry forward lets you add unused allowance from the previous threetax years to this year's allowance. You must first use up the current year's allowance, then bring forward unused amounts oldest-year-first, and you must have been a member of a registered pension scheme in each year you carry forward from.
Your personal contributions are still limited to 100% of this year's earnings, so carry forward is most powerful for employer contributions or a one-off earnings spike. It is not available against money purchase contributions once the MPAA applies.
The Annual Allowance Charge
Exceed your available allowance and the excess attracts an annual allowance charge — effectively the tax relief is clawed back by adding the excess to your taxable income, reported on your Self Assessment return.
Where the charge is over £2,000 and relates to a single scheme exceeding the allowance, you can ask the scheme to pay it via Scheme Pays, in exchange for a reduction in your eventual benefits — useful when the charge is large and you would rather not find the cash.
Defined Benefit Pensions
For a defined benefit scheme there is no simple contribution figure. HMRC instead measures the pension input amount — broadly the growth in the capitalised value of your promised pension (the annual increase multiplied by 16, plus any lump sum increase), adjusted for inflation. This counts towards the annual allowance like any other contribution, which is why a big pay rise can trigger an annual allowance charge even though no cash was paid in.
Worked Examples
How the taper reduces the allowance at different levels of adjusted income (assuming threshold income is also above £200,000):
Adjusted income
Reduction
Tapered allowance
£260,000 or less
£0
£60,000
£300,000
£20,000
£40,000
£340,000
£40,000
£20,000
£360,000 or more
£50,000 (capped)
£10,000 (floor)
A director with £40,000 of unused allowance carried forward from earlier years could, in a high-bonus year, still pay in well over the tapered figure by stacking the brought-forward amounts on top — provided their personal contributions stay within 100% of earnings. Model the numbers with the pension calculator and the pension allowance tool.
The standard annual allowance is £60,000 in 2026/27. This is the maximum total of pension contributions — from you, your employer, and any third party, plus the tax relief — that can be paid into your pensions each year while still receiving tax relief. It applies across all your pensions combined, not per scheme. Personal contributions are also separately limited to 100% of your relevant UK earnings (or £3,600 gross if you earn less), so even though the allowance is £60,000 you cannot personally contribute more than you earn and get relief.
How does the tapered annual allowance work?
The tapered annual allowance reduces the £60,000 limit for high earners. It is triggered only if your "threshold income" exceeds £200,000 AND your "adjusted income" exceeds £260,000. Once both are crossed, the £60,000 allowance is cut by £1 for every £2 of adjusted income above £260,000, down to a minimum tapered allowance of £10,000 — reached at £360,000 of adjusted income. Threshold income is broadly your taxable income less personal pension contributions; adjusted income adds back employer pension contributions. The two-test design means someone can sometimes avoid the taper by making a personal pension contribution that pulls threshold income back under £200,000.
What is the Money Purchase Annual Allowance (MPAA)?
The Money Purchase Annual Allowance is a reduced £10,000 limit that applies once you have "flexibly accessed" a defined contribution pension — most commonly by taking taxable income from drawdown or a cash lump sum (UFPLS) beyond the tax-free element. After that point, you can only put £10,000 a year into money purchase pensions with tax relief, and you can no longer carry forward unused allowance for those contributions. Taking only your 25% tax-free lump sum, or buying a lifetime annuity, does not normally trigger the MPAA — it is taking taxable flexible income that does.
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What is pension carry forward and how do I use it?
Carry forward lets you use unused annual allowance from the previous three tax years, on top of the current year's allowance, to make a larger contribution without an annual allowance charge. You must first use up the current year's allowance, then bring forward unused amounts starting with the oldest year. You must have been a member of a registered pension scheme in each year you carry forward from. Your personal contributions are still capped at 100% of this year's earnings, so carry forward is most useful for employer contributions or for people with a one-off spike in earnings.
What happens if I exceed the annual allowance?
If your total contributions exceed your available allowance (including any carry forward), the excess is subject to an annual allowance charge, which effectively claws back the tax relief by adding the excess to your taxable income for the year. You report this on your Self Assessment return. If the charge is large — over £2,000 and the excess relates to a single scheme over the allowance — you may be able to ask your pension scheme to pay it on your behalf through "Scheme Pays", in exchange for a reduction in your eventual pension benefits.
Do employer contributions count towards the annual allowance?
Yes. The annual allowance covers all contributions to your pensions — your own contributions, your employer's, salary sacrifice amounts, and the tax relief added — across every scheme combined. This is why high earners with generous employer pensions can breach the allowance even without large personal contributions, and why employer contributions are added back when calculating adjusted income for the taper. Salary sacrifice contributions count as employer contributions for this purpose.
How is the annual allowance measured for a defined benefit pension?
For a defined benefit (final salary or career average) scheme, there is no simple contribution figure, so HMRC measures the "pension input amount" — broadly the increase in the capitalised value of your promised pension over the year, multiplied by a factor of 16, plus any increase in lump sum, with an inflation adjustment. This figure counts towards your annual allowance just like a defined contribution payment. A large pay rise can cause a surprisingly big pension input amount and trigger an annual allowance charge even though no cash changed hands.
Can I still pay into a pension after I retire?
Yes, up to age 75 you can keep contributing and receiving tax relief, subject to the annual allowance and the 100%-of-earnings limit. If you have no relevant earnings you can still pay in up to £3,600 gross a year (£2,880 net). However, once you have flexibly accessed a pension the £10,000 MPAA usually applies to further money purchase contributions, and carry forward is no longer available against them. Many people continue pension contributions in semi-retirement specifically to keep mopping up tax relief.
Does the annual allowance interact with the old lifetime allowance?
The lifetime allowance was abolished from April 2024 and replaced by separate lump sum allowances, but the annual allowance is unaffected and continues exactly as before. So while there is no longer an overall cap on the size of your pension pot, there remains an annual cap on how much you can contribute with tax relief each year. The two are independent: removing the lifetime allowance did not change the £60,000 annual allowance, the taper or the MPAA.
How can high earners avoid the tapered annual allowance?
Because the taper only bites when threshold income exceeds £200,000, a personal pension contribution (which reduces threshold income) can sometimes pull you back under £200,000 and restore the full £60,000 allowance. Other options include timing of bonuses, using carry forward from earlier years before earnings rose, and considering whether salary sacrifice (which counts as employer contribution and so does not reduce threshold income) is the right route. The interaction is complex and the numbers move quickly, so high earners near these thresholds should take advice each year.
How do I work out how much annual allowance I have left?
Start with this year's allowance (£60,000, or your tapered amount if applicable, or £10,000 if the MPAA applies to money purchase savings). Subtract all contributions and pension input amounts for the year. Then add any unused allowance carried forward from the previous three years, using the oldest first, provided you were a scheme member in those years. The result is your available allowance. A pension calculator and your annual pension statements (which show pension input amounts) make this far easier to track.
Disclaimer: This guide reflects 2026/27 UK pension annual allowance rules. The standard allowance, taper thresholds, MPAA and carry-forward rules change at fiscal events, and the interaction with your earnings and other pensions is complex. Consult a qualified financial adviser before making large contributions or flexibly accessing a pension, and refer to gov.uk for current rates.