Pension Contribution Limits UK

The Annual Allowance

The annual allowance is the total amount that can be paid into your pension pots in a tax year before you lose tax relief. For 2026-27, it's £60,000.¹

This includes:

• Your own contributions
• Your employer's contributions
• Any third-party contributions (e.g. from a spouse)

Contributions above the annual allowance are subject to a tax charge at your marginal rate. The charge is collected through Self Assessment.

The annual allowance was raised from £40,000 to £60,000 in April 2023 to encourage pension saving.

The Tapered Annual Allowance for High Earners

If you earn over £260,000 (adjusted income), your annual allowance reduces by £1 for every £2 you earn above that threshold.²

The taper reduces your allowance to a minimum of £10,000. This happens at £360,000 adjusted income:

• Excess over £260,000: £100,000
• Allowance reduction: £100,000 ÷ 2 = £50,000
• Tapered allowance: £60,000 - £50,000 = £10,000

Adjusted income is your total taxable income plus employer pension contributions. If your threshold income (income before pension contributions) is under £200,000, the taper doesn't apply even if your adjusted income is higher.

Carry Forward

If you didn't use your full annual allowance in the previous three tax years, you can carry forward the unused amounts and contribute more this year.³

Example: You earned £80,000/year and contributed £10,000/year to your pension for the past three years. You've used £10,000 of your £60,000 allowance each year, leaving £50,000 unused per year.

This year, you can contribute:

• This year's allowance: £60,000
• Carry forward from 2025-26: £50,000
• Carry forward from 2024-25: £50,000
• Carry forward from 2023-24: £50,000
• Total: £210,000

You must have been a member of a pension scheme in those earlier years to use carry forward. You also need sufficient earnings in the current year to support the contribution (you can't contribute more than your annual earnings unless it's employer-funded).

Carry forward is useful for one-off bonuses or windfalls that you want to shelter from tax.

Money Purchase Annual Allowance

If you've started taking money from a defined contribution pension (beyond the 25% tax-free lump sum), your annual allowance drops to £10,000 for future contributions. This is called the money purchase annual allowance (MPAA).⁴

This prevents people from withdrawing their pension tax-free, then recycling it back into a pension to get tax relief again.

Taking your 25% tax-free lump sum alone doesn't trigger the MPAA. Only flexible withdrawals (income drawdown or UFPLS) trigger it.

The Lifetime Allowance Was Abolished

The lifetime allowance (LTA) used to cap the total value of your pension pots at £1,073,100 (2022-23 onwards). If your pots exceeded that at retirement, you paid a 25% tax charge on the excess taken as income, or 55% on lump sums.

This was abolished from April 2024. There is now no limit on how much your pensions can grow. High earners can build pension pots of £2 million, £5 million, or more without penalty.

The government abolished it because it was pushing senior doctors and professionals into early retirement to avoid the LTA charge.

Earning Less Than the Annual Allowance

You can only get tax relief on pension contributions up to 100% of your earnings (or the annual allowance, whichever is lower).

If you earn £30,000/year, you can contribute £30,000 and get tax relief on all of it (even though the annual allowance is £60,000). If you earn £10,000/year, you can contribute £10,000.

Non-earners (including children) can contribute £2,880/year and the government adds basic-rate relief to make it £3,600. This is useful for stay-at-home parents or retirees with no income.

What Happens If I Go Over?

If you exceed the annual allowance, you pay a tax charge on the excess at your marginal income tax rate. For example, if you're a higher-rate taxpayer and contribute £70,000 (£10,000 over the allowance), you owe £10,000 × 40% = £4,000 tax.

This is reported on your Self Assessment tax return. If the excess is over £20,000, HMRC will contact you. Your pension provider may offer Scheme Pays, where the pension scheme pays the tax charge and reduces your pension pot instead.