The pension annual allowance is the single most important number most people never check - it caps how much can go into your pension each year with tax relief, across every pension you hold. For 2026/27, it remains £60,000, unchanged from the last few tax years. Here’s what it actually covers and who needs to pay closer attention.
What the annual allowance covers
The £60,000 limit applies to the total of everything paid into your pensions in a tax year - your own contributions, your employer’s contributions, and any tax relief added on top. It’s not £60,000 per pension; if you have a workplace pension and a personal SIPP, both count toward the same combined £60,000 limit.
What happens if you go over it
Exceeding the annual allowance doesn’t stop the contribution happening, but it does trigger an annual allowance charge - effectively clawing back the tax relief you received on the excess, added to your income and taxed at your marginal rate. This is reported via Self Assessment.
Carry forward: using unused allowance from previous years
If you haven’t used your full annual allowance in the last three tax years, you may be able to carry forward the unused amount, potentially allowing a much larger contribution in a single year - useful after a bonus, inheritance, or business sale. We cover this in detail in our dedicated carry-forward article, including a full worked example.
The tapered annual allowance for high earners
If you’re a high earner, your allowance may be lower than £60,000. The taper applies if:
- Your threshold income (broadly, income before pension contributions) is over £200,000, and
- Your adjusted income (threshold income plus pension contributions) is over £260,000.
Where both apply, the £60,000 allowance reduces by £1 for every £2 of adjusted income above £260,000, down to a minimum allowance of £10,000 for the highest earners. This is separate from the £100,000 Personal Allowance taper covered in our tax planning series - high earners can be affected by both at once.
The 100% of earnings cap for personal contributions
Separately from the annual allowance, tax relief on your own contributions (not employer contributions) is capped at 100% of your UK relevant earnings for the tax year. If you earn £40,000, you can’t get tax relief on a £60,000 personal contribution even though it’s within the annual allowance - the earnings cap bites first. This doesn’t restrict employer contributions in the same way.
Why this rarely affects most people - but matters a lot when it does
The large majority of pension savers are nowhere near £60,000 a year in combined contributions - for context, that’s more than four times the full new State Pension, which pays around £12,548 a year in 2026/27. But it becomes highly relevant in a handful of common situations: a higher earner making a large one-off contribution to reduce a tax bill, someone using carry forward after a strong income year, or a business owner deciding how much their company should contribute directly to their pension.
The bottom line
For the vast majority of savers, £60,000 is a ceiling you’ll never bump into in an ordinary year. But if you’re planning a large contribution - via a bonus, carry forward, or an employer contribution as a business owner - check where you sit against both the standard allowance and the tapered version before assuming the full £60,000 is available to you.
This article is provided for general information and does not constitute financial or tax advice. Pension allowances and tapering rules depend on your full personal and income circumstances and can change. If you're unsure how much you can contribute, speak to a regulated financial adviser.
Sources
- GOV.UK pension annual allowance guidance
- HMRC Pensions Tax Manual
- The Private Office 2026/27 tax tables
- Fidelity International.
