Pension Annual Allowance for 2026/27
The pension Annual Allowance for the 2026/27 tax year is £60,000. This is the maximum amount of pension savings you can make in a year that benefit from tax relief. Understanding how the Annual Allowance works — including the taper for high earners and carry forward rules — can help you maximise your retirement savings.
How the Annual Allowance Works
The £60,000 Annual Allowance covers all pension contributions made in the tax year, including:
- Your personal contributions
- Employer contributions (including salary sacrifice)
- Any third-party contributions (e.g., from a spouse)
If your total contributions exceed £60,000, you will face an Annual Allowance charge. This charge is added to your income tax bill and is taxed at your marginal rate.
Annual Allowance History
| Tax Year | Annual Allowance |
|---|---|
| 2026/27 | £60,000 |
| 2025/26 | £60,000 |
| 2024/25 | £60,000 |
| 2023/24 | £60,000 |
| 2022/23 | £40,000 |
| 2021/22 | £40,000 |
Tapered Annual Allowance for High Earners
If your adjusted income exceeds £260,000, your Annual Allowance is reduced. For every £2 of adjusted income above £260,000, your allowance reduces by £1, down to a minimum of £10,000.
To be affected by the taper, you must also have a threshold income above £200,000. Threshold income is broadly your taxable income before pension contributions.
Carry Forward: Using Unused Allowance
If you have not used your full Annual Allowance in the previous three tax years, you can carry forward the unused amount. For 2026/27, you can carry forward unused allowance from:
- 2023/24: Up to £60,000 unused
- 2024/25: Up to £60,000 unused
- 2025/26: Up to £60,000 unused
You must use the current year's allowance first, then the earliest year's unused allowance. You must have been a member of a registered pension scheme in each year you wish to carry forward from.
Money Purchase Annual Allowance (MPAA)
If you have flexibly accessed your pension (taken income beyond the 25% tax-free lump sum), your Annual Allowance for money purchase pensions drops to £10,000. This applies if you have:
- Taken income through flexi-access drawdown
- Taken an Uncrystallised Funds Pension Lump Sum (UFPLS)
- Taken a short-term annuity from flexi-access drawdown
The MPAA does not apply if you have only taken your 25% tax-free lump sum or purchased a lifetime annuity.
How the Annual Allowance Affects Different Groups
Basic Rate Taxpayers
Most basic rate taxpayers will not come close to the £60,000 limit. Focus on maximising employer contributions and consider using salary sacrifice to boost pension savings.
Higher Rate Taxpayers
Higher rate taxpayers receive 40% tax relief on pension contributions. If you earn above £50,270, maximising pension contributions is one of the most effective tax planning strategies available. Consider carry forward to make larger contributions.
Additional Rate Taxpayers
Those earning above £125,140 should be aware of the tapered Annual Allowance. Careful planning is needed to determine your exact allowance and avoid unexpected tax charges.
Avoiding Annual Allowance Charges
- Track all pension contributions including employer contributions
- Use carry forward to absorb excess contributions
- Check whether the taper applies to your income level
- Consider spreading large contributions across tax years
- Take professional advice if you are a high earner or making large contributions