The carry forward opportunity some pension savers may miss

For years, the pension annual allowance remained at £40,000. From 6 April 2023, it increased to £60,000. That means that for the 2026/27 tax year, some eligible savers could have up to £20,000 more carry forward available than they did in 2025/26 - but the rules are more complex than they first appear.

How carry forward works in practice

Carry forward allows you to use unused annual allowance from the previous three tax years and add it to your current year’s allowance.

This can be particularly useful if your financial situation has changed, for example if you’ve received a bonus, and you want to boost your pension contributions. However, there are limits.

One of the common misconceptions is that if you’ve got unused allowance from previous years, you can contribute as much as you like into your pension.

It’s not quite as simple as that. While personal contributions that receive tax relief are usually limited by your relevant UK earnings in the current tax year, employer contributions are treated differently - although they still count towards your annual allowance.

Your six-point carry forward checklist

Because carry forward can be complex, it’s important to understand the rules before making any decisions.

1. You must use your full current year’s annual allowance before using carry forward.
2. Unused allowance must be carried forward from the earliest available tax year first.
3. Personal contributions that receive tax relief are usually limited to 100% of your relevant UK earnings in the current tax year. In other words, even if you have significant unused allowance available, that does not usually mean you can make personal contributions above your relevant UK earnings and still receive tax relief. Employer contributions are treated differently, but they still count towards your annual allowance.
4. Higher earners may have a reduced (tapered) annual allowance, which means the amount they can contribute tax-efficiently could be lower than the standard annual allowance. This means not everyone will have the same carry forward allowance.
5. You must have been a member of a registered pension scheme in the tax year or years from which you want to carry forward unused allowance.
6. If you’ve flexibly accessed a defined contribution pension, the money purchase annual allowance (MPAA) may apply. This increased from £4,000 to £10,000 from 6 April 2023. Importantly, you cannot carry forward unused MPAA from earlier tax years.

Who might make use of the carry forward allowance?

Carry forward tends to be most useful for people whose income isn’t consistent year to year.

For example, someone who is self-employed or receives irregular bonuses may have contributed less in previous years, but has the opportunity to contribute more in a stronger year.

It’s particularly helpful where earnings fluctuate as it allows people to make up for lower contributions in previous years when their income may have been lower.

Why timing matters

Carry forward works on a rolling basis, which means unused allowances don’t last forever.

Each tax year, the oldest available allowance drops away. So, if it’s not used in time, the opportunity is lost.

That makes the end of the tax year an important moment to review your pension contributions, especially now that the higher £60,000 allowance is feeding through into the carry forward rules.

Because carry forward works on a rolling basis, any unused allowance from the 2023/24 tax year will fall away after 5 April 2027 if it’s not used. That was the last tax year in which the standard annual allowance was £40,000.

Make sure you fully understand carry forward before taking action

Carry forward can be a valuable way to boost your pension savings, but it isn’t always straightforward. It’s important to approach it carefully and assess whether carry forward is right for your situation.

If you’re unsure, consider speaking to a tax adviser or financial adviser about how the rules apply to your circumstances.

• Download the carry forward guide