Annual Allowance (Pensions)

Understanding the Pension Annual Allowance

The annual allowance is the maximum amount you can contribute to pensions in a tax year while still receiving tax relief. For 2025/26, it is £60,000 or 100% of your earnings, whichever is lower. Contributions above this limit are subject to a tax charge.

If you have not used your full annual allowance in the previous three tax years, you can carry forward the unused amount. This is particularly useful for high earners who want to make large one-off contributions. You must have been a member of a pension scheme in the carry-forward years.

For very high earners (adjusted income above £260,000), the annual allowance is tapered down to a minimum of £10,000. This affects a small number of top earners but can be a significant planning consideration. See our pension calculator.

How Annual Allowance Works in Practice

The Annual Allowance is the maximum amount that can be contributed to your pensions each year with tax relief. For 2025/26, it is £60,000 (including employer contributions). Unused allowance from the previous three years can be carried forward. The Tapered Annual Allowance reduces this for high earners: the allowance decreases by £1 for every £2 of adjusted income over £260,000, down to a minimum of £10,000.

Practical Tips

Most employees are well below the £60,000 Annual Allowance, but those with generous employer contributions (particularly in the NHS and other public sector schemes) can be caught. If you exceed the Annual Allowance, you face a tax charge on the excess. Carry forward is a valuable tool — if you have not used your full allowance in the last three years, you can make larger contributions this year. See salary sacrifice calculator.

Related Topics

The Money Purchase Annual Allowance (MPAA) of £10,000 applies if you have flexibly accessed a defined contribution pension. This significantly restricts future pension contributions.