Pension Annual Allowance 2026: Rules, Limits & How to Maximise
Everything you need to know about the pension annual allowance for 2025/26 and 2026/27, including the standard limit, tapered allowance, MPAA, and carry forward rules.
11 min readUpdated March 2026
What Is the Pension Annual Allowance?
The pension annual allowance is the maximum amount you can save into pensions each tax year while still receiving tax relief. For the 2025/26 and 2026/27 tax years, the standard annual allowance is £60,000.
This limit covers all pension contributions – including your personal contributions, employer contributions, and any contributions made by third parties on your behalf. If you exceed the allowance, you will face a tax charge on the excess.
Remember: The £60,000 annual allowance was increased from £40,000 in the 2023/24 tax year. This represents a significant boost to the amount higher earners can save tax-efficiently into their pensions.
Key Allowance Limits for 2026/27
Allowance Type
Amount
Who It Applies To
Standard annual allowance
£60,000
Most pension savers
Tapered annual allowance (minimum)
£10,000
Adjusted income over £260,000
Money Purchase Annual Allowance (MPAA)
£10,000
Those who have accessed pensions flexibly
Carry forward (max 3 years)
Up to £180,000
Those with unused allowance from previous years
The Tapered Annual Allowance
If your adjusted income exceeds £260,000, your annual allowance is reduced by £1 for every £2 of income above the threshold. The minimum tapered allowance is £10,000, which applies once adjusted income reaches £360,000.
Adjusted income includes your total taxable income plus any employer pension contributions. Threshold income (your income minus personal pension contributions) must also exceed £200,000 for the taper to apply.
Carry Forward Rules
If you did not use your full annual allowance in the previous three tax years, you can carry forward the unused amount. This allows you to make larger contributions in a single year without incurring a tax charge.
You must have been a member of a registered pension scheme in the years you are carrying forward from
You must use the current year’s allowance first, then the oldest unused allowance
Your contributions still cannot exceed 100% of your relevant UK earnings
Money Purchase Annual Allowance (MPAA)
Once you flexibly access your defined contribution pension (for example, through drawdown or taking an uncrystallised funds pension lump sum), the MPAA of £10,000 applies to future money purchase contributions. This is designed to prevent people from recycling pension withdrawals to gain double tax relief.
Caution: Taking even a small amount of taxable income from your defined contribution pension triggers the MPAA. This permanently reduces your annual allowance from £60,000 to £10,000 for money purchase contributions. Taking your 25% tax-free lump sum alone does not trigger the MPAA.
Annual Allowance Tax Charge
If you exceed your annual allowance, the excess is taxed at your marginal income tax rate. For a higher-rate taxpayer exceeding the allowance by £10,000, this would mean a tax charge of £4,000. If the charge exceeds £2,000, you can ask your pension scheme to pay it from your pension pot using ‘Scheme Pays’.
Frequently Asked Questions
The standard pension annual allowance for the 2026/27 tax year is £60,000. This covers all pension contributions including personal, employer, and third-party contributions.
If you exceed your annual allowance, you face a tax charge on the excess at your marginal income tax rate. You report this through your Self Assessment tax return. If the charge is over £2,000, you can use Scheme Pays to have your pension scheme settle the charge.
Yes, you can carry forward unused annual allowance from the previous three tax years. You must have been a member of a registered pension scheme in those years, and you use the current year allowance first before carrying forward.
The tapered annual allowance reduces the £60,000 limit for individuals with adjusted income over £260,000. The allowance reduces by £1 for every £2 over the threshold, down to a minimum of £10,000.
The MPAA of £10,000 is triggered when you flexibly access your defined contribution pension, such as taking income through drawdown or an uncrystallised funds pension lump sum (UFPLS). Taking only a tax-free lump sum does not trigger it.
Yes, all pension contributions count towards your £60,000 annual allowance, including employer contributions, salary sacrifice amounts, and any third-party contributions.
Add up all pension contributions made during the tax year, including employer contributions and any salary sacrifice. If the total exceeds £60,000 (or your tapered/MPAA limit), you have exceeded the allowance and must report it via Self Assessment.
No. The annual allowance was £40,000 from 2014/15 to 2022/23. It was increased to £60,000 from the 2023/24 tax year as part of the Spring Budget 2023 changes.
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