Guide · 5 minute read · Updated 10 Jul 2026

Pension annual allowance and carry forward explained

The annual allowance is the most you can put into pensions each year with tax relief: £60,000 in 2026/27, or 100% of your earnings if that is lower. Carry forward lets you mop up unused allowance from the last three years, which is where a big lump sum can go.

The £60,000 allowance, and the earnings cap

For 2026/27 the standard annual allowance is £60,000. This is the total that can go into all your pensions in the year (your contributions, your employer's, and the tax relief) before a tax charge applies.

There is a second limit that catches lower earners: you only get tax relief on personal contributions up to 100% of your relevant UK earnings. So if you earn £30,000, your effective ceiling for your own contributions is £30,000, not £60,000. Employer contributions do not count against this earnings cap, only against the £60,000. If you have no earnings at all, you can still pay in £2,880 a year and get it topped up to £3,600 with tax relief.

Carry forward: using the last three years

If you did not use your full allowance in previous years, carry forward lets you bring it forward and add it to this year's. You can reach back three tax years, so in 2026/27 you can use unused allowance from 2023/24, 2024/25 and 2025/26.

Two conditions apply. You must have been a member of a registered pension scheme in each year you carry forward from, even if you paid nothing in. And you must fill this year's allowance first, then use the oldest unused year next, working forwards. Crucially, carry forward does not escape the earnings cap: you still cannot get relief on more than 100% of this year's earnings, however much unused allowance you have banked.

A worked example: someone who paid £20,000 into their pension in each of the last three years has £40,000 of unused allowance per year, £120,000 in total. Add this year's £60,000 and they could in theory contribute up to £180,000, but only if their earnings this year are at least that high.

The taper for high earners

If your income is high, the £60,000 allowance shrinks. Two income tests apply for 2026/27:

• Threshold income over £200,000, which is broadly your income minus your own pension contributions.
• Adjusted income over £260,000, which is broadly your income plus pension contributions (including your employer's).

You are only tapered if you cross both. Above £260,000 of adjusted income, the allowance falls by £1 for every £2 over, down to a minimum of £10,000. That £10,000 floor is reached once adjusted income hits £360,000. Carry forward still works alongside the taper: unused allowance from earlier years is calculated using whatever your (possibly tapered) allowance was in each of those years.

The £10,000 MPAA trap

There is one more way the allowance collapses. Once you flexibly access a defined contribution pension, meaning you start taking taxable income from it rather than just the tax-free lump sum, the money purchase annual allowance (MPAA) kicks in. From that point your annual allowance for defined contribution pensions is just £10,000, and you lose the ability to carry forward into those pensions.

This catches people who dip into a pension early, perhaps to bridge to a new job, then return to work and want to rebuild it. So if you might keep contributing, think hard before triggering flexible access. Taking only the 25% tax-free lump sum does not trigger the MPAA; taking taxable income does.

Common questions

What is the pension annual allowance for 2026/27?

£60,000, or 100% of your relevant UK earnings if that is lower. It covers everything going into your pensions in the year: your contributions, your employer's, and the tax relief. Go over it without spare carry forward and a tax charge claws back the relief.

How many years can I carry forward pension allowance?

Three tax years. In 2026/27 you can use unused allowance from 2023/24, 2024/25 and 2025/26. You must have been a member of a pension scheme in each year you carry forward from, and you use the current year's allowance first before reaching back.

How does the tapered annual allowance work?

If your threshold income is over £200,000 and your adjusted income is over £260,000, your £60,000 allowance drops by £1 for every £2 of adjusted income above £260,000, down to a £10,000 minimum reached at £360,000 of adjusted income.

Does taking money from my pension reduce my annual allowance?

Taking the 25% tax-free lump sum alone does not. But flexibly accessing taxable income triggers the money purchase annual allowance, cutting your allowance for defined contribution pensions to £10,000 a year and removing carry forward for them.

Guidance and education, not regulated financial advice.