Retirement no longer means stopping pension contributions for everyone. Many retirees continue to work part-time, do consultancy, or have other UK earnings — and as long as you have relevant earnings, you can continue building your pension and receiving tax relief.
The main complication arises if you have already started drawing from your pension flexibly. In that case, the Money Purchase Annual Allowance (MPAA) applies and caps your defined contribution pension contributions at £10,000 per year.
Contribution Rules After Retirement
| Your situation | Maximum annual DC contribution | Tax relief available |
|---|---|---|
| Retired, still working part-time (£20,000 earnings) | £20,000 (100% of earnings) | Yes — at your marginal rate |
| Retired, no UK earnings | £3,600 gross (£2,880 net) | Yes — 20% basic rate (relief at source) |
| Retired, drawing flexi drawdown income | £10,000 (MPAA applies) | Yes — at your marginal rate on earnings |
| Retired, bought standard annuity (no drawdown) | Up to £60,000 or 100% earnings | Yes |
What Counts as Relevant UK Earnings
Only certain income qualifies as the basis for pension contributions above £3,600:
- Employment income (salary, wages, bonuses)
- Self-employment income (profits from sole trading or partnership)
- Furnished holiday lettings income (HMRC-qualifying)
- Patent royalties
Not relevant UK earnings:
- State Pension
- Private pension income (drawdown, annuity)
- Rental income from buy-to-let
- Investment income, dividends
- Savings interest
The MPAA Trap
The most important thing to understand is the interaction between drawdown and future contributions. Once you take income from a flexi-access drawdown fund — even a single £1 payment — you trigger the MPAA. From that point, your money purchase annual allowance drops to £10,000.
This can catch people out who:
- Take a small lump sum from their SIPP to supplement retirement income, then return to part-time work and want to rebuild their pension
- Start drawdown at 60 while still working, and later want to contribute more
Avoiding the trap: If you want to continue contributing significantly to a DC pension after retirement, consider:
- Taking tax-free cash only and buying an annuity with the remainder — this does NOT trigger the MPAA
- Using small pot rules (lump sums under £10,000 from up to three personal pension pots) — also does NOT trigger the MPAA
- Deferring drawdown until you are confident you will not need to contribute further
Worked Example
Scenario: Anne retires at 63 from full-time employment and starts part-time consultancy earning £18,000 per year. She has not yet drawn from her pension.
- She can contribute up to £18,000/year to her SIPP (100% of earnings)
- She contributes £12,000 net → provider claims 20% → £15,000 in pension pot
- She has not triggered the MPAA, so the full £60,000 annual allowance applies
- Net tax cost: £12,000 for £15,000 in pension (basic rate taxpayer)
If Anne later starts drawdown to supplement income: the MPAA applies and her DC contributions are capped at £10,000 per year from that point.
April 2027 — Pension IHT Change
From April 2027, unspent DC pension pots will be subject to inheritance tax as part of your estate. This changes the calculus for contributing to a pension in retirement versus using ISAs:
- Before April 2027: Pension contributions in retirement are very tax-efficient; pots sit outside your estate
- After April 2027: Large unspent pension pots may attract 40% IHT; consider whether an ISA (which does not come into estate for IHT under current rules) might serve you better if the pension will likely be unspent
If you plan to pass pension wealth to children or grandchildren, take advice before April 2027.