The pension Annual Allowance explained
Quick answer: The Annual Allowance is the maximum that can go into your pensions in a year before a tax charge applies.
The Annual Allowance is the maximum that can go into your pensions in a year before a tax charge applies. For most people it is £60,000 — but high earners and those who have already taken pension benefits can have a far lower limit.
Last reviewed:
Primary source: gov.uk/tax-on-your-private-pension/annual-allowance
What counts towards the allowance
The Annual Allowance is the total that can be contributed to your pensions in a tax year — your own contributions, your employer's contributions, and any third-party contributions, plus the value of any defined-benefit accrual.
Contributions are also capped at 100% of your relevant UK earnings. So someone earning £30,000 cannot contribute more than £30,000 in a year, even if their Annual Allowance is higher.
The tapered allowance
For very high earners, the Annual Allowance tapers down. If your adjusted income (broadly, your taxable income plus pension contributions made by you and your employer) exceeds £260,000, the allowance is reduced by £1 for every £2 of excess.
The minimum tapered allowance is £10,000, reached at adjusted income of £360,000 or above.
Money Purchase Annual Allowance and carry forward
If you have already drawn taxable income from a defined-contribution pension (for example, taking flexible drawdown), the Money Purchase Annual Allowance applies: only £10,000 a year can go in.
Unused Annual Allowance from the three previous tax years can usually be carried forward, provided you were a member of a registered pension scheme in those years and your current earnings cover the contribution.
Common questions
- What happens if I go over the Annual Allowance?
- You pay an Annual Allowance charge at your marginal rate on the excess. It is normally reported on your Self Assessment tax return; in some cases your pension scheme can pay it for you under 'scheme pays'.
- Does the £60,000 include tax relief?
- Yes. The £60,000 figure is the total gross amount going into the pension — including basic-rate relief added by the provider and any employer contributions.
- How do I carry forward unused allowance?
- Use up the current year's allowance first, then look back at the last three tax years in order (oldest first) to use any unused allowance from those years. There is no special form — just make the larger contribution and reflect it in your Self Assessment.