What is Pension Annual Allowance? UK Definition 2026/27
Quick Answer
The maximum you can contribute to pensions with tax relief each year - £60,000 for 2026/27.
Definition of Pension Annual Allowance
The pension annual allowance is the maximum amount of pension savings you can make each year with tax relief. For 2026/27, it's £60,000 or 100% of your earnings, whichever is lower.
Contributions above the allowance incur an Annual Allowance Charge at your marginal tax rate. High earners may have a reduced allowance (Tapered Annual Allowance) if income exceeds £260,000.
Pension Annual Allowance — Key Facts for 2026/27
| Standard allowance | £60,000 |
| Money purchase AA | £10,000 (if triggered) |
| Carry forward | 3 previous years |
| Taper threshold | £260,000 adjusted income |
How Pension Annual Allowance Works — Example
- 1Annual allowance: £60,000
- 2Salary: £80,000
- 3Employer contribution: £8,000
- 4Employee contribution: £20,000
- 5Total: £28,000 (within allowance)
- 6Unused allowance: £32,000
- 7Can carry forward for 3 years
How Pension Annual Allowance Affects Your Tax
Maximising pension contributions is highly tax-efficient, especially for higher rate taxpayers. Use carry forward rules to make larger contributions.
Official HMRC Guidance on Pension Annual Allowance
For official guidance, refer to HMRC's documentation. Tax rules can change, so always verify current rates and thresholds on gov.uk.
HMRC: Pension annual allowanceFrequently Asked Questions about Pension Annual Allowance
Related Tax Terms
Accuracy Note
This information is for guidance only and is based on 2026/27 tax year rates. Tax rules are complex and your circumstances may differ. For personal advice, consult a qualified accountant or tax adviser.