The main pension contribution limit, often called the pension cap, is the annual allowance of £60,000 for 2026/27. It covers everything paid into your pensions in the tax year, by you, your employer or anyone else. Two further limits sit alongside it. Tax relief on your own contributions is capped at 100% of your UK earnings, or £3,600 gross if higher. And the allowance falls to as little as £10,000 for very high earners or for anyone who has started drawing taxable income flexibly from a pension pot.
The limits at a glance (2026/27)
| Limit | Amount | What it caps |
|---|---|---|
| Annual allowance | £60,000 | Total pension saving from all sources |
| Relief on personal contributions | 100% of relevant UK earnings, or £3,600 gross | Tax relief on your own contributions |
| Tapered annual allowance | Down to £10,000 | Saving where threshold income exceeds £200,000 and adjusted income exceeds £260,000 |
| Money purchase annual allowance | £10,000 | Defined contribution saving after flexible access |
| Lump sum allowance | £268,275 | Tax-free cash over your lifetime |
None of these limits stops you paying more in. They govern how much attracts tax relief, or at what point a tax charge claws the relief back. There is no limit any more on the total value of your pensions. The lifetime allowance was abolished on 6 April 2024 and replaced by caps on tax-free lump sums; see our guide to the lifetime allowance.
The £60,000 annual allowance
Section 228 of Finance Act 2004 sets the annual allowance at £60,000 for 2023/24 and later years. From 2016/17 to 2022/23 it was £40,000. The test runs on the tax year, 6 April to 5 April, and counts:
- Defined contribution schemes. The total paid in during the tax year, by you, your employer or anyone else, gross of tax relief;
- Defined benefit schemes. The increase in the value of your benefits over the year, not the cash paid in.
Employer contributions are the part people forget. They do not count against the 100%-of-earnings relief limit, but they count in full towards the annual allowance. A director whose company pays £50,000 into their pension has only £10,000 of the standard allowance left for personal contributions, before any carry forward.
The 100% of earnings limit and the £3,600 floor
Personal contributions get tax relief only up to the higher of your relevant UK earnings for the year and the basic amount of £3,600 gross (section 190 of Finance Act 2004). Relevant UK earnings means employment income, profits from a trade or profession you carry on, and certain patent income. Dividends and rental income do not count. That matters for company owners who pay themselves a small salary and the rest as dividends: their personal contributions are capped by the salary, while employer contributions are not.
Relief is also limited to members who are UK resident and under 75. A non-earner can pay £2,880 into a relief at source scheme and receive the 20% top-up to £3,600. How the relief is given is covered in our guide to pension tax relief.
The tapered annual allowance
For high earners, section 228ZA reduces the £60,000 allowance by £1 for every £2 of adjusted income above £260,000, but not below £10,000. The taper only applies if threshold income is also above £200,000. Threshold income leaves out ordinary employer contributions, although salary given up under a sacrifice arrangement made after 8 July 2015 is added back. Adjusted income adds all pension saving back in, including employer contributions. As an illustration, the taper reaches the £10,000 floor at adjusted income of £360,000.
These two income measures are different from "adjusted net income", which drives the Personal Allowance taper. Our guide to adjusted income works through both.
The money purchase annual allowance
Once you flexibly access a defined contribution pension, for example by taking taxable cash from a flexi-access drawdown fund or an uncrystallised funds pension lump sum, future defined contribution saving is limited to £10,000 a year. This is the money purchase annual allowance. If you also build up defined benefit pension, that saving is tested against an alternative annual allowance of £50,000, which is the £60,000 less the £10,000.
Carry forward: using earlier years
Unused annual allowance from the three previous tax years can be carried forward and added to the current year's allowance under section 228A. Two conditions matter:
- Membership. You must have been a member of a registered pension scheme at some time in each year you carry forward from, even if nothing was paid in that year;
- Order. The current year's allowance is used first, then unused allowance from the earliest of the three years.
The previous three years for 2026/27 are 2023/24, 2024/25 and 2025/26, each with a £60,000 allowance. In principle, up to £240,000 of saving can be covered in 2026/27, as an illustration. Carry forward does not lift the 100%-of-earnings cap on relief for personal contributions, so it is mainly useful for employer contributions and for people with high earnings in the current year.
Going over: the annual allowance charge
Saving above your available allowance is taxed through the annual allowance charge, reported on your Self Assessment return. The charge works as if the excess were added to your taxable income, so it is paid at your marginal rate, 20%, 40% or 45% in England, Wales and Northern Ireland and at the Scottish rates for Scottish taxpayers. The effect is to reverse the relief on the excess.
If the charge for the year is more than £2,000 and your saving in a particular scheme exceeds the standard allowance, you can ask that scheme to pay the charge from your benefits ("mandatory scheme pays"). HMRC's pension schemes rates page lists the allowances for current and earlier years, which you need for carry forward.
Large or one-off contributions, particularly employer contributions from an owner-managed company, should be checked against the taper, carry forward and the company's deduction before they are paid. Acumon's tax planning team runs those calculations, and our private client tax service reports any annual allowance charge correctly on the return.