The pension annual allowance for 2027/28 is £60,000 — unchanged from 2026/27.
Last reviewed: May 2026. No change to pension annual allowance is expected for 2027/28. Important: pensions are included in the IHT estate from April 2027 — see Inheritance Tax Thresholds 2027/28.
Pension Annual Allowance — 2027/28
| Allowance | Amount |
|---|---|
| Standard annual allowance | £60,000 |
| Money Purchase Annual Allowance (MPAA) | £10,000 |
| Tapered AA minimum | £10,000 |
| Taper applies above (adjusted income) | £260,000 |
| Threshold income (anti-avoidance test) | £200,000 |
Tapered Annual Allowance — 2027/28
| Adjusted income | Tapered annual allowance |
|---|---|
| Up to £260,000 | £60,000 (no taper) |
| £280,000 | £50,000 |
| £300,000 | £40,000 |
| £320,000 | £30,000 |
| £340,000 | £20,000 |
| £360,000 or more | £10,000 (minimum) |
Carry Forward — What You Can Bring Into 2027/28
If you have unused annual allowance from previous years, you can carry it forward:
| Tax year | Standard AA | If unused, can carry forward |
|---|---|---|
| 2024/25 | £60,000 | Yes |
| 2025/26 | £60,000 | Yes |
| 2026/27 | £60,000 | Yes |
| 2027/28 (current) | £60,000 | Used first |
| Maximum 2027/28 contribution | Up to £240,000 |
Subject to sufficient earnings — relief is limited to 100% of UK earnings for personal contributions.
Key Change: Pensions in IHT Estate from April 2027
From 6 April 2027, unused defined contribution pension funds are included in the IHT estate. This fundamentally changes the estate planning use of pensions:
| Strategy | Position before April 2027 | Position from April 2027 |
|---|---|---|
| Pension as legacy vehicle | IHT-free — passes outside estate | Subject to 40% IHT above nil-rate band |
| Large DC pot over NRB | No IHT | IHT applies on excess |
| Spending pension in retirement | Sub-optimal if pension was IHT-free | More rational now — may reduce IHT |
Action: Review your pension nomination and estate plan with a financial adviser.
Annual Allowance Charge
Contributions above the annual allowance attract a charge at your marginal tax rate:
- If your pension input exceeds £60,000 (or MPAA/tapered allowance if applicable), the excess is added to your income and taxed at 20%, 40%, or 45%
- The charge can sometimes be paid from the pension itself (Scheme Pays) if it exceeds £2,000 and the excess within the scheme exceeds £10,000
What Counts as Pension Input
The annual allowance applies to the total pension input period — the total of your contributions, your employer’s contributions, and any government top-up (basic rate tax relief added by the scheme).
For defined contribution (DC) pensions:
- All contributions regardless of source — yours, employer, and third party (e.g. a spouse paying into your pension)
- Personal contributions get 20% basic rate relief added, so a £800 personal contribution = £1,000 pension input
For defined benefit (DB) pensions:
- Annual allowance test measures the increase in the pension value during the year, multiplied by 16 (the prescribed accrual factor), plus any lump sum increases
- A DB scheme that increases your annual pension entitlement by £3,000 adds £48,000 (£3,000 × 16) to your pension input — this can catch people unaware, particularly those receiving large pension increases from career progression
If you are in both DB and DC schemes, the pension inputs are combined and tested against the £60,000 allowance (or MPAA/tapered where applicable).