What is the pension annual allowance for 2026/27?

The pension annual allowance for 2026/27 is £60,000. This is the maximum you can contribute to pensions (including employer contributions) while still receiving tax relief. You can carry forward unused allowance from the previous 3 years if you've been in a pension scheme.

How much can I take as a tax-free lump sum from my pension?

You can take up to 25% of your pension as a tax-free lump sum, capped at £268,275 (the Lump Sum Allowance). This cap applies to combined lump sums from all your pensions throughout your lifetime. Beyond this, lump sums are taxed at your marginal income tax rate.

What is the Money Purchase Annual Allowance?

The Money Purchase Annual Allowance (MPAA) is £10,000. It applies once you've flexibly accessed your pension (taken taxable income from it). After triggering the MPAA, your annual allowance for defined contribution pensions drops from £60,000 to £10,000, limiting future tax-relieved contributions.

Can I carry forward unused pension allowance?

Yes. If you don't use your full £60,000 annual allowance, you can carry forward the unused portion for up to 3 years. To use carry forward, you must have been a member of a registered pension scheme during those years. Your current year's allowance is used first.

Has the Lifetime Allowance been abolished?

Yes. The Lifetime Allowance (previously £1,073,100) was abolished from April 2024. However, it was replaced by two new limits: the Lump Sum Allowance (£268,275 for tax-free lump sums) and the Lump Sum and Death Benefit Allowance (£1,073,100 for combined lump sums and death benefits).

Pension Allowance 2026/27 — Annual Allowance, Lump Sum Limits & Tax Relief | PocketWise

Pension Allowance 2026/27 — Annual Allowance, Lump Sum Limits & Tax Relief

Complete guide to pension allowances for 2026/27 tax year. Annual allowance, tax-free lump sum limits, Money Purchase Annual Allowance, carry forward rules, and how to maximise your pension contributions.

By PocketWise · 29 March 2026 · Last reviewed: 9 April 2026 · 6 min read Updated for 2026/27 tax year

Pension rules changed significantly in 2024 with the abolition of the Lifetime Allowance. Here’s everything you need to know about pension allowances for 2026/27.

Pension Allowances 2026/27 — Quick Reference

Allowance	Amount	What It Limits
Annual Allowance	£60,000	Total yearly contributions
Money Purchase Annual Allowance (MPAA)	£10,000	After flexible access
Tapered Annual Allowance (minimum)	£10,000	High earners (over £260,000)
Lump Sum Allowance (LSA)	£268,275	Tax-free lump sums
Lump Sum and Death Benefit Allowance (LSDBA)	£1,073,100	Combined lump sums + death benefits

Annual Allowance — £60,000

The Annual Allowance caps how much can be contributed to your pensions each year with tax relief.

What Counts Towards the Annual Allowance?

Contribution Type	Counts?
Your personal contributions	Yes
Employer contributions	Yes
Salary sacrifice contributions	Yes
Defined benefit pension accrual	Yes (calculated differently)
State Pension	No

Annual Allowance Rules

Rule	Detail
Maximum	£60,000 (or 100% of earnings if lower)
Minimum for non-earners	£3,600 gross (£2,880 net)
Employer contributions	Unlimited, but still count towards your allowance
Tax charge on excess	Marginal income tax rate

Example: £80,000 Salary

Contribution	Maximum Tax-Relieved
Personal contributions	£60,000 gross
Combined with employer	£60,000 total
Tax relief at 40%	£24,000

Carry Forward — Use Unused Allowance

If you haven’t used your full £60,000 allowance in previous years, you can carry forward the unused amount.

Carry Forward Rules

Rule	Detail
Years available	Previous 3 tax years
Requirement	Must have been in a pension scheme each year
Order of use	Current year’s allowance used first
Maximum with carry forward	Up to £60,000 per year × 4 = £240,000

Carry Forward Example

Tax Year	Allowance	Used	Unused
2023/24	£60,000	£10,000	£50,000
2024/25	£60,000	£8,000	£52,000
2025/26	£60,000	£12,000	£48,000
2026/27	£60,000	—	£60,000
Total available 2026/27			£210,000

Who Should Use Carry Forward?

Situation	Benefit
Large bonus this year	Shelter from income tax
Earning over £100,000	Restore Personal Allowance
Inheritance received	Tax-efficient investment
Business sale	Shelter the proceeds
Approaching retirement	Maximise pension pot

Tapered Annual Allowance — High Earners

If you earn over £260,000 (threshold income + adjusted income combined), your Annual Allowance is reduced.

Taper Calculation

Threshold	Amount	Effect
Threshold Income	£200,000+	Triggers taper check
Adjusted Income	£260,000+	Taper applies
Taper rate	£1 lost per £2 over £260,000
Minimum allowance	£10,000	Floor kicks in at £360,000

Adjusted Income vs Threshold Income

Income Type	Threshold Income	Adjusted Income
Salary	✓	✓
Bonus	✓	✓
Dividends	✓	✓
Employer pension contributions	✗	✓
Employee pension contributions	✗ (deduct)	✓

Taper Example

Total Income	Annual Allowance
£260,000	£60,000
£280,000	£50,000
£300,000	£40,000
£320,000	£30,000
£340,000	£20,000
£360,000+	£10,000

Money Purchase Annual Allowance (MPAA) — £10,000

Once you’ve flexibly accessed your pension, your Annual Allowance drops for defined contribution pensions.

What Triggers the MPAA?

Action	Triggers MPAA?
Taking 25% tax-free lump sum only (no income)	No
Taking income via drawdown	Yes
Taking an UFPLS (Uncrystallised Funds Pension Lump Sum)	Yes
Buying an annuity	No
Taking small pot lump sums (under £10,000)	No
Reaching pension age but not accessing	No

MPAA Impact

Before MPAA	After MPAA
£60,000 annual allowance (DC)	£10,000 annual allowance (DC)
Carry forward available	Carry forward still available for DB
Full tax relief	Tax relief on £10,000 only

How to Avoid Triggering MPAA

Strategy	How It Works
Take tax-free lump sum only	Don’t take any taxable income yet
Buy an annuity	Annuity purchase doesn’t trigger MPAA
Use defined benefit pension first	DB pensions don’t trigger MPAA
Small pot rule	Pots under £10,000 can be taken without triggering

Tax-Free Lump Sum — Lump Sum Allowance

You can take up to 25% of your pension tax-free, subject to the Lump Sum Allowance (LSA) of £268,275.

How the LSA Works

Detail	Amount
Maximum tax-free lump sum	25% of pot, up to £268,275 lifetime
Multiple pensions	Combined across all pensions
Exceeding the limit	Excess taxed at marginal rate

Tax-Free Lump Sum Examples

Pension Pot	25% of Pot	Tax-Free Amount	Taxable Excess
£200,000	£50,000	£50,000	£0
£500,000	£125,000	£125,000	£0
£1,000,000	£250,000	£250,000	£0
£1,500,000	£375,000	£268,275	£106,725
£2,000,000	£500,000	£268,275	£231,725

Protected Allowances

If you had Lifetime Allowance protection before April 2024, you may have a higher Lump Sum Allowance:

Protection	LSA Amount
No protection	£268,275
Fixed Protection 2016	£312,500
Individual Protection 2016	Varies (up to £312,500)
Enhanced Protection	Depends on previous LTA

Lump Sum and Death Benefit Allowance — £1,073,100

This limits the combined value of:

Tax-free lump sums you take
Serious ill-health lump sums
Death benefit lump sums paid to beneficiaries

LSDBA Rules

Scenario	Treatment
Death before 75	Lump sum to beneficiaries tax-free (up to LSDBA)
Death after 75	Lump sum taxed at beneficiary’s marginal rate
Serious ill-health	Tax-free up to LSDBA if under 75
Exceeding LSDBA	Excess taxed at 55% (lump sum) or marginal rate

Pension Tax Relief Rates

Tax relief on pension contributions depends on your marginal tax rate.

England/Wales/NI

Tax Band	Tax Relief Rate	£1,000 Gross Costs
Basic rate (20%)	20%	£800 net
Higher rate (40%)	40%	£600 net
Additional rate (45%)	45%	£550 net

Scotland

Tax Band	Tax Relief Rate	£1,000 Gross Costs
Starter/Basic (19-20%)	20% (reliefs at UK rate)	£800 net
Intermediate (21%)	21%	£790 net
Higher (42%)	42%	£580 net
Advanced (45%)	45%	£550 net
Top (48%)	48%	£520 net

How to Claim Higher/Additional Rate Relief

Method	How
Self Assessment	Claim on tax return
Phone HMRC	Request tax code adjustment
Net pay scheme (employer)	Automatic at full rate

Defined Benefit Pension Rules

Defined benefit (final salary/career average) pensions calculate allowance use differently.

DB Allowance Calculation

Step	Calculation
1	Take your annual pension entitlement at year end
2	Subtract entitlement at year start (uprated by CPI)
3	Multiply by 16
4	Add any lump sum increase
5	Result = pension input amount

DB Example

Item	Amount
Pension at year start	£25,000/year
After CPI uplift	£25,750/year
Pension at year end	£27,500/year
Increase	£1,750/year
× 16	£28,000 pension input

This counts towards your £60,000 annual allowance.

Annual Allowance Charge

If you exceed your annual allowance, you pay a tax charge on the excess.

How the Charge Works

Item	Rate
Charge rate	Your marginal income tax rate
On excess contributions	Income tax as if extra income
Scheme Pays	Ask pension to pay charge if over £2,000

Annual Allowance Charge Example

Scenario	Calculation
Contributions	£75,000
Annual allowance	£60,000
Excess	£15,000
Tax band	40%
Charge	£6,000

Scheme Pays

If your charge is over £2,000 and contributions (not carry forward) caused it, you can ask your pension scheme to pay the charge. They reduce your pension to cover it.

Key Pension Dates 2026/27

Date	Event
6 April 2026	New tax year — annual allowance refreshes
31 January 2027	Self Assessment deadline for 2025/26 (claim higher rate relief)
5 April 2027	End of 2026/27 tax year
31 July 2027	Deadline for election re: carry forward (previous year)