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Pension annual allowance and carry forward, explained
One £60,000 limit, three ways it shrinks — the taper, the MPAA, and what carry forward can (and cannot) rescue.
Based on HMRC’s Pensions Tax Manual (PTM055100, PTM056510, PTM057100, PTM053100) and Finance Act 2004.
7 min read · Last reviewed
— In short
The standard pension annual allowance is £60,000 for 2026/27, the cap on pension saving that receives tax relief in a year. The high-earner taper can cut it to a £10,000 floor. Flexibly accessing defined-contribution benefits normally triggers the £10,000 MPAA for money-purchase inputs and changes how other pension inputs are tested. Unused allowance from the previous three tax years can be carried forward, and saving above the available allowance is taxed at the member's marginal rate.
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The annual allowance caps the pension saving that gets tax relief each year — £60,000 as standard for 2026/27. The taper cuts it for high earners, down to a £10,000 floor. Once a defined-contribution pot is flexibly accessed, the £10,000 money purchase annual allowance normally applies to money-purchase inputs and changes the test for other pension inputs. Unused allowance from the previous three years can be carried forward. Save above the allowance you have and the excess is taxed at your marginal rate.
The standard allowance and the input amount
For defined-contribution pensions the input amount is simply the contributions paid (by member and employer). For defined-benefit pensions it is not the contributions: it is the growth in the capitalised value of the promised pension over the year. Capital value is 16× the annual pension (PTM053301, Step 2: “multiply the annual amount of that pension by 16”) plus any separate automatic lump sum at face value — that lump is already a capital amount, so it is not 16×-multiplied — and the opening value is revalued by the prior-September CPI before it is subtracted (PTM053301; FA 2004 s.235). The whole position runs in the Pension Annual Allowance calculator; the DB measure is worked in DB pension input amount & CPI revaluation (or the DB PIA calculator).
The taper for high earners
Two income tests gate the taper: it applies only if threshold income exceeds £200,000 and adjusted income exceeds £260,000. Above the adjusted-income gate the allowance falls by £1 for every £2, down to a £10,000 floor (reached at £360,000 of adjusted income).
- Standard annual allowance
- £60,000
- Adjusted income
- £280,000
- Excess over the £260,000 gate
- £20,000
- Reduction (£1 for every £2)
- −£10,000
- Tapered annual allowance
- £50,000
More cases — the floor, and the taper meeting carry forward — are in Tapered annual allowance: worked examples and the taper explainer; the Tapered Annual Allowance calculator applies the right year’s thresholds. (PTM057100.)
The money purchase annual allowance (MPAA)
Flexibly accessing a defined-contribution pension (drawdown income or an UFPLS — not a PCLS alone) triggers the £10,000 MPAA: from then on money-purchase saving above £10,000 is charged, and a default-versus- alternative test decides the chargeable amount on the rest. Carry forward survives the trigger but can never lift the £10,000 cap.
The two-part test is worked in Exceeding the money purchase annual allowance and the MPAA explainer; the MPAA calculator runs it. (PTM056510.)
Carry forward
You can use unused allowance from the three previous tax years, provided you were a pension-scheme member in those years. The current year’s allowance is spent first, then prior years oldest-first — and each prior year’s unused amount is measured against that year’s own allowance (tapered if it applied then), not the current £60,000. That last point is the most common carry-forward error.
See Carry-forward of unused annual allowance and Taper and carry forward together; the Pension Carry Forward calculator shows the oldest-first working. (PTM055100 / 055200.)
Common questions
What is the pension annual allowance for 2026/27?
£60,000 as standard. It can be reduced to as little as £10,000 by the high-earner taper. Flexibly accessing defined-contribution benefits normally triggers the £10,000 MPAA for money-purchase inputs and changes how other pension inputs are tested.
How does the tapered annual allowance work?
If threshold income is over £200,000 and adjusted income over £260,000, the £60,000 allowance falls by £1 for every £2 of adjusted income above £260,000, down to a £10,000 floor at £360,000. Both income tests must be met before any taper applies (PTM057100).
Can I carry forward unused annual allowance?
Yes — from the previous three tax years, if you were a scheme member in them. The current year is used first, then the oldest year. Each prior year’s unused allowance is measured against that year’s own (possibly tapered) allowance, not the current standard figure.
Does the MPAA stop carry forward?
Not entirely. Carry forward survives an MPAA trigger and still helps the defined-benefit side of the test, but it can never be added to the £10,000 money-purchase cap itself (PTM056510; ADR-038).
Building a real annual-allowance position? Each calculator above produces a branded compliance-annex PDF with the full working and the PTM references. For planning and illustration only; this guide does not constitute financial or tax advice.
Sources & grounding
Allowance + taper + MPAA values (standard AA £60,000; taper gates £200,000 threshold income / £260,000 adjusted income; £1-for-£2 reduction to a £10,000 floor at £360,000; MPAA £10,000): calc-engine 2026-27.json (standardAnnualAllowance / taperThresholdIncome / taperAdjustedIncome / taperFloor / mpaaAmount), per PTM051100 (annual allowance: essential principles) / PTM057100 (taper) / PTM056510 (MPAA) — the same constants the AA calculators render. Citation corrected 2026-08-06: the standard allowance was attributed to PTM055100, which is “Annual allowance: carry forward: general”, and the MPAA level to PTM056510, the substantive page (both gov.uk-checked).
Taper worked example (adjusted income £280,000 → reduction £10,000 → tapered AA £50,000): engine corpus, the case shown in “Tapered annual allowance: worked examples”. PTM057100.
Primary sources:PTM057100
Carry forward (three prior years, current-year allowance used first then oldest-first; prior-year unused measured against THAT year’s own (possibly tapered) allowance, not the standard £60,000): PTM055100 / 055200; FA 2004 s.228A.
Primary sources:PTM055100FA 2004 s.228A.
MPAA interaction (carry forward survives the trigger but can never lift the £10,000 money-purchase cap; a default-vs-alternative chargeable-amount test applies): PTM056510; ADR-038.
Primary sources:PTM056510
DB pension input amount (16× the accrued pension only — not a separate automatic lump sum, which is face value — with the opening value revalued by the prior-September CPI before subtraction): PTM053100 / 053301; FA 2004 s.234–236.
Primary sources:PTM053100FA 2004 s.234–236.
For planning and illustration purposes only. Verify all inputs against source documents. This explainer does not constitute financial or tax advice.
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