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Pension carry forward annual allowance

pensions & retirement

The carry forward annual allowance explained

Find out how you can carry forward unused pension annual allowances from previous years, and still receive tax relief.

What is the pension carry forward rule?

The pension carry forward rule allows you to take advantage of unused annual allowances from the previous three tax years, and add it to this year’s allowance.

This means, you can receive tax relief on pension contributions which exceed the usual £40,000 annual allowance. However, your earnings must be at least equal to the amount that you are looking to contribute at that point.

To qualify for carry forward, you must have:

  • Contributed less than your annual allowance in at least one of the previous three tax years
  • Been a member of a pension scheme in each year you are carrying forward
  • Used up your full annual allowance in the current tax year

Even with carry forward, you cannot contribute more than you have earned in a tax year. 

How does the carry forward rule work?

The following table gives an example of how much annual allowance an individual could carry forward.

Tax Year Annual Allowance Total contribution Unused allowance
2017-18 £40,000 £10,000 £30,000
2018-19 £40,000 £30,000 £10,000
2019-20 £40,000 £30,000 £10,000

In the 2020-21 tax year, they could carry forward £50,000 unused annual allowance from the previous three years. Added to their £40,000 annual allowance, they could potentially contribute £90,000 and receive tax relief on that amount. 

In order to contribute £90,000, they would also have to earn at least that much in the current tax year. 

How to check if you have unused annual allowance

The amount of unused annual allowance you have will depend on how much you have contributed in the past three years. Contributions from your employer also count towards your annual allowance. 

You can use the government’s annual allowance calculator to check if you have unused annual allowance. 

How carry forward works in practice

The main ways to take advantage of your unused pension allowance are:

  • If you make regular payments into your pension, you can increase the amount you pay.
  • You can also pay a lump sum into a pension at any time. 

You don’t need to report this to HMRC .

If you are not sure how much more you can contribute this tax year, your pension provider should be able to help you.

Carry forward rules and the money purchase annual allowance (MPAA)

Once you have started taking pension benefits and in particular taxable income payments, you will have triggered the money purchase annual allowance (MPAA), you cannot carry forward any unused allowances from previous years. From that point, your annual allowance is limited to £4,000. 

Carry forward rules and the tapered annual allowance

You can still carry forward any unused annual allowance if you are a high earner with a tapered annual allowance

For example: if your annual income in a tax year is over £312,000, your annual allowance is reduced to £4,000. If you did not make any pension contributions in a tax year, you could potentially carry forward the unused £4,000 of annual allowance to another year. 

Pension carry forward FAQs

You can only carry forward from the previous three tax years. Effectively using the full annual allowance in  the current tax year, 2020-21, then you can carry forward any unused annual allowances from the previous three tax years being 2017-18, 2018-19 and 2019-20.

Employer pension contributions count towards your annual allowance. You could carry forward any unused annual allowance whether you have made personal contributions, employer contributions or both.

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