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Carry forward

Most people can tax-efficiently contribute up to £60,000 – the annual allowance – to their pension each tax year as long as they earn this much or have an employer willing to contribute towards their pension. It may be possible to contribute more than this though by ‘carrying forward’ unused annual allowances from the three previous years.

How does pension carry forward work?

A tax charge normally becomes due if a client’s pension contributions exceed the annual allowance. Pension carry forward, where available, allows them to make pension contributions in excess of the annual allowance while still receiving tax relief.

To qualify, the client must have used up their annual allowance in the current tax year and have contributed less than their annual allowance in any of the previous three tax years. For example, if they only contributed £30,000 in 2023/24 when the annual allowance was £60,000, then £30,000 in unused allowance can potentially be carried forward to the current tax year. A condition is the client must earn at least the amount they wish to contribute in the year they are making the investment, unless the contributions are funded by the employer. Certain other conditions apply too.

When utilising an unused allowance, the earliest of the three carry forward years should be used first.

How does pension carry forward work with the tapered annual allowance?

Carry forward can still be used where the tapered annual allowance applies. The client needs to measure any unused annual allowance against their tapered allowance for each given year. For example, if for a particular year the annual allowance was tapered down to £30,000 and they contributed £25,000, there would be £5,000 annual allowance available to be carried forward to a future year.

How does pension carry forward work with the money purchase annual allowance?

If a client is already flexibly accessing their pension and is subject to the money purchase annual allowance (MPAA), they will not be able to take advantage of carry forward for any contributions to a money purchase pension. This applies from the date in the tax year they first trigger the MPAA and to every subsequent tax year. However, if they are a member of a defined benefit pension scheme, they may still be able to utilise any available carry forward against contributions to that arrangement.

Client guide on utilising carry forward

To support your discussions and help your clients understand the importance of maximising their pension contributions, download this guide.

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Important information

The content contained on this page is designed to give professional financial advisers technical information on retirement planning and pensions legislation and should not be relied upon.

This article represents a summary of our understanding of the law at the date of its last review (March 2024). Tax limits, benefits, allowances and rules are often subject to change and may change in future. Advisers and individuals should check that tax limits, allowances and rules have not changed. The value of benefits depends on individual circumstances. The minimum age you can normally access your pension savings is currently 55, and is due to rise to 57 on 6 April 2028, unless you have a lower protected pension age. Different options may have different effects for tax purposes, different implications for pension provision and different impacts on other assets and financial planning.