How much can you put into your pension each year?
In brief: You can contribute up to £60,000 into your pension each year (or 100% of your earnings, whichever is lower). If you haven’t used your full allowance in the past three years, you may be able to contribute more than £60,000 in a single year using carry forward. High earners face a reduced allowance, and accessing pension income early can reduce your future limit permanently.
If you’ve received a bonus, come into some money, or simply want to make a larger contribution before the end of the tax year, the annual allowance is the first thing to understand. It sets the outer boundary for how much can go into your pension while still receiving tax relief — and getting it wrong means a tax charge.
The standard annual allowance
The annual allowance for 2026/27 is £60,000. This is the total gross contribution from all sources in a single tax year — your own contributions, your employer’s contributions, and the tax relief added by the government all count towards it.
There is a second test: contributions cannot exceed 100% of your UK earnings in the tax year. If you earn £40,000, your effective limit is £40,000, not £60,000. If you have no earnings at all, you can still contribute up to £3,600 gross per year.
It is worth knowing that employer contributions count towards the annual allowance. A £40,000 personal contribution into a pension where your employer also contributes £25,000 would take total gross contributions to £65,000 — £5,000 over the allowance.
What happens if you exceed the annual allowance
If your total pension contributions in a tax year exceed your annual allowance, the excess is subject to the Annual Allowance Charge. This is not a flat penalty — it is effectively a clawback of the tax relief you received on the excess.
The charge is added to your taxable income for the year and taxed at your marginal rate through self-assessment. A higher rate taxpayer with £10,000 of excess contributions would face a charge of £4,000 (40%). A basic rate taxpayer would face £2,000 (20%).
The charge does not always apply automatically — you declare it on your self-assessment return. Your pension provider will issue a Pension Savings Statement if they know you have exceeded the allowance, but it is ultimately your responsibility to report it correctly.
In most cases, exceeding the allowance makes the excess contribution financially pointless: the tax relief gained on contributions is cancelled out by the charge on the excess. If you are in this position, it is worth understanding whether carry forward could have helped — or whether it can help next time.
Carry forward: using unused allowance from past years
If you did not use your full annual allowance in each of the past three tax years, you can carry the unused amounts forward and add them to this year’s allowance.
The rules are straightforward:
- You must have been a member of a registered pension scheme in each year you want to carry forward from. You do not need to have contributed anything — simply being an active member is enough.
- You must use the current year’s allowance in full first, before drawing on carry forward.
- You draw on the oldest unused year first, working forwards.
- Your total contributions in the year still cannot exceed 100% of your earnings for that year.
A worked example
Suppose you want to make a large contribution in 2026/27 and you want to understand how much carry forward you have available.
| Tax year | Annual allowance | Contributions made | Unused allowance |
|---|---|---|---|
| 2023/24 | £60,000 | £20,000 | £40,000 |
| 2024/25 | £60,000 | £30,000 | £30,000 |
| 2025/26 | £60,000 | £25,000 | £35,000 |
In 2026/27, you first use the current year’s £60,000 allowance. Once that is fully used, you can draw on carry forward in chronological order — oldest first. This gives a total potential contribution of:
£60,000 + £40,000 + £30,000 + £35,000 = £165,000
This is the maximum you could contribute in 2026/27, assuming your earnings are at least £165,000 and you were a member of a pension scheme throughout the three prior years.
In practice, carry forward is particularly useful for the self-employed, for those receiving a large one-off payment, or for someone who has recently become able to make larger contributions and wants to catch up on previous years.
The tapered annual allowance for high earners
For those with higher incomes, the annual allowance reduces — potentially significantly.
The taper applies when two conditions are both met:
- Threshold income exceeds £200,000. Threshold income is broadly your net income before pension contributions (including employer contributions).
- Adjusted income exceeds £260,000. Adjusted income adds your own and your employer’s pension contributions back on top of your net income.
If both thresholds are breached, the annual allowance tapers downward by £1 for every £2 of adjusted income above £260,000, until it reaches a minimum of £10,000 at £360,000 adjusted income.
| Adjusted income | Annual allowance |
|---|---|
| Up to £260,000 | £60,000 |
| £280,000 | £50,000 |
| £300,000 | £40,000 |
| £320,000 | £30,000 |
| £340,000 | £20,000 |
| £360,000 or above | £10,000 |
The threshold income test acts as a filter. If your income before pension contributions is below £200,000, the taper does not apply regardless of employer contributions — so the calculation is only necessary for genuinely high earners.
Carry forward can still be used with the tapered allowance, but the carry forward amounts also need to be based on what your tapered allowance was in each of those prior years. This can make the calculation more involved.
The Money Purchase Annual Allowance (MPAA)
There is a separate, lower annual allowance that applies once you start taking taxable income from a defined contribution pension.
The Money Purchase Annual Allowance is £10,000. It applies permanently from the point you first:
- Take income from a flexi-access drawdown arrangement, or
- Take an UFPLS (uncrystallised funds pension lump sum)
Taking only tax-free cash — for example, a Pension Commencement Lump Sum when crystallising into drawdown without yet drawing income — does not trigger the MPAA. The trigger is taxable income from a money purchase source, not the act of accessing the pension itself.
Once triggered, the MPAA replaces the standard £60,000 allowance for future money purchase contributions. It cannot be reversed. This means that if you access pension income early and then return to employment — or later have the means to make larger contributions — your ability to rebuild your pension pot is permanently limited to £10,000 per year for DC contributions.
The MPAA does not affect defined benefit pension accrual. If you are still accruing a DB pension while also drawing DC income, your DB accrual is tested against a separate “alternative annual allowance” of £50,000. The combined DB accrual and DC contributions must not exceed £60,000 in total, with the DC element capped at £10,000.
Carry forward cannot be used to increase the MPAA. Once it applies, £10,000 is the ceiling for money purchase contributions, with no ability to supplement it from prior years.
How FutureClear models the annual allowance
FutureClear tracks annual allowance usage and carry-forward automatically based on the contribution figures you enter. For each year in your projection, the engine calculates:
- Total gross contributions (personal, employer, and tax relief)
- Available carry forward from the prior three years
- Whether the MPAA applies, based on whether you’ve modelled taxable drawdown or UFPLS income
- Whether the tapered allowance applies, based on the income figures in your scenario
If contributions in any year exceed the available allowance, this is flagged in your projection so you can adjust the inputs.
These projections are for modelling purposes only. They do not constitute financial advice. Tax rules are subject to change. Please consult a qualified financial adviser before making financial decisions.