What is the Annual Allowance for Pensions? (UK 2026/27)

The standard annual allowance for UK pension contributions is £60,000 for 2026/27, covering combined contributions from you, your employer and HMRC tax relief across all your pensions. High earners with adjusted income above £260,000 see a tapered allowance (down to £10,000 minimum). Anyone who has flexibly accessed a DC pension triggers the Money Purchase Annual Allowance (MPAA) of £10,000. Unused allowance can be carried forward for up to three tax years in oldest-first order.

This is the framework for 2026/27.

The standard £60,000 annual allowance

The annual allowance is the maximum total contribution to all your pensions in a single tax year while still getting tax relief.

For 2026/27: £60,000 standard annual allowance.

This includes:

• Your contributions (whether via SIPP, personal pension, or workplace pension).
• Employer contributions (workplace pension matches, voluntary contributions from employer).
• HMRC tax relief added to your contributions.

A worked example for an employee:

• You earn £50,000.
• Personal pension contribution: £4,000 net (£5,000 gross with basic-rate relief).
• Employer workplace pension contribution: £3,000.
• Total in pension this year: £5,000 + £3,000 = £8,000.
• Allowance used: £8,000 out of £60,000.

For a director-shareholder of a limited company taking £20,000/year as a pension contribution from the company:

• Company contributes £20,000 directly.
• This counts toward the £60,000 annual allowance.

For a self-employed person:

• Their own personal contributions (gross of basic-rate relief) count.
• Cap is the lower of £60,000 or 100% of relevant UK earnings (profits for self-employed).

The tapered annual allowance for high earners

If you’re a high earner, the standard £60,000 is reduced via the tapered annual allowance.

The rule:

• Adjusted income above £260,000: allowance reduces by £1 for every £2 over.
• Minimum allowance: £10,000 (reached when adjusted income hits £360,000).

Adjusted income includes salary, bonus, dividends, rental income, capital gains, employer pension contributions, etc. — broadly your total income, not just employment.

A worked example:

• Adjusted income: £300,000.
• Above threshold by: £300,000 − £260,000 = £40,000.
• Reduction: £40,000 / 2 = £20,000.
• Annual allowance: £60,000 − £20,000 = £40,000.

Above £360,000 of adjusted income, the allowance is capped at £10,000 minimum.

For high earners, modelling the tapered allowance is critical to avoid annual allowance charges (which essentially claw back the relief on excess contributions).

The Money Purchase Annual Allowance (MPAA)

If you’ve flexibly accessed a DC pension — i.e. taken any taxable income beyond the 25% tax-free lump sum — you trigger the MPAA.

• MPAA: £10,000 per year for DC contributions.
• Applies to defined contribution pensions only.
• Doesn’t affect defined benefit accrual (which has its own input rules).
• No carry-forward for DC contributions once MPAA is triggered.

Common ways to trigger MPAA:

• Taking flexible drawdown income from a DC pension.
• Taking a lump sum that includes any taxable element (beyond the pure 25% tax-free PCLS).
• Buying a flexible-access annuity.

Ways to NOT trigger MPAA:

• Taking only the 25% tax-free lump sum (no taxable income).
• Taking a DB pension (DB doesn’t trigger MPAA on the recipient).
• Buying a lifetime annuity (a fixed annuity, not flexible access).
• Taking small pots under £10,000 as a single lump sum (under specific conditions).

For someone still working and contributing to a pension, the MPAA is a serious constraint. Avoid flexibly accessing pension income until you’re ready to stop building.

Carry-forward of unused allowance

If you didn’t use the full annual allowance in any of the previous three tax years, you can carry forward the unused amount.

The rules:

• Carry-forward is in oldest-first order — earliest unused tax year first.
• You must have been a member of a registered pension scheme in the relevant tax year (even with no contributions in that year).
• Carry-forward doesn’t apply to MPAA — once triggered, DC contributions are capped at £10,000.
• Carry-forward does apply to the tapered allowance (you can carry forward unused taper).

A worked example:

• 2022/23: £40,000 allowance, you contributed £20,000. Unused: £20,000.
• 2023/24: £60,000 allowance, you contributed £30,000. Unused: £30,000.
• 2024/25: £60,000 allowance, you contributed £40,000. Unused: £20,000.
• 2026/27: standard £60,000 + carry-forward £70,000 = £130,000 maximum allowance.

This is a powerful tool for catch-up contributions in good years — particularly for self-employed people with variable income or those receiving windfalls.

HMRC: pension annual allowance and carry-forward.

The annual allowance charge

If you exceed the annual allowance and don’t qualify for carry-forward:

• The excess is added to your taxable income for the year.
• It’s taxed at your marginal rate (20%, 40% or 45%).
• This effectively claws back the tax relief on the excess contribution.

You report the excess on your Self Assessment and pay the additional tax. It’s administratively painful but not catastrophic if managed.

For very large excesses (over £40,000), you can elect for the pension scheme to pay the charge directly from your pension pot (called “Scheme Pays”) — this avoids needing to find the cash yourself.

What about defined benefit (DB) pensions?

DB pensions don’t have a simple cash contribution — they accrue a future income entitlement. The annual allowance still applies to DB, but it’s calculated as:

• Pension Input Amount (PIA): the increase in your annual DB benefit, multiplied by 16, plus any increase in your lump sum entitlement, minus the previous year’s benefit indexed for CPI.
• This represents the “contribution equivalent” for annual allowance purposes.

For most NHS, Teachers, Police and Civil Service pension members, the PIA is calculated automatically by the scheme and reported annually. You don’t need to do the maths yourself — the scheme tells you.

For high-earning DB members (consultant doctors, senior civil servants), the PIA can be substantial and may use most or all of the standard annual allowance — particularly after pay rises that boost the PIA materially.

Worked example: medium earner planning contributions

Sarah, 40, earns £85,000. Her workplace pension scheme has a 6+6 match (i.e. she contributes 6%, employer matches 6%).

• Employee contribution: 6% × £85,000 = £5,100.
• Employer contribution: 6% × £85,000 = £5,100.
• HMRC tax relief on her contribution (already in the £5,100 gross): no additional separate amount.

Total annual pension input: £10,200. Annual allowance used: £10,200 out of £60,000.

She could contribute much more — up to £60,000 in total without triggering the annual allowance charge. If she has £100,000 of bonus this year and wants to use it for pension:

• Standard allowance: £60,000 (minus current usage of £10,200 = £49,800 remaining for 2026/27).
• Carry-forward from 2022/23, 2023/24, 2024/25 (if unused): potentially another £50,000+.
• Could contribute £100,000+ in 2026/27 with full tax relief.

Internal links

• How does pension tax relief work for higher rate taxpayers?
• Can I have a SIPP and a workplace pension at the same time?
• Can I take my pension at 55 and still work?

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This guide is information, not regulated financial advice. Annual allowance rules interact with carry-forward, taper and MPAA in complex ways — get regulated advice for material decisions.