UK pension allowances explained: annual, taper and lump sum limits

The simple version

Pension allowances shape how much you can save into a pension tax-efficiently, and how much tax-free cash you can eventually take out. They exist because pension saving is heavily supported by tax relief, and the government limits how much of that support any one person can receive.

The right answer for you depends on your income, your pension type, your employer's contributions and the tax year in question. Because the rules and figures change from time to time, the most useful habit is to understand the moving parts rather than memorising a single number that may be out of date next year.

This guide explains the main allowances in plain English: the annual allowance, the tapered allowance for high earners, the money purchase annual allowance, carry forward, and the lump sum allowances that replaced the old lifetime allowance. Treat the figures as a current snapshot and confirm them on gov.uk before acting.

The annual allowance

The annual allowance is the headline limit. It caps the total that can be paid into your pensions in a tax year while still attracting tax relief. For the 2025/26 tax year the standard annual allowance is £60,000.

Importantly, that limit covers everything going in: your own contributions, contributions from your employer, and anything paid on your behalf by someone else. It is easy to focus only on what you personally pay and forget that a generous employer contribution uses up part of the same allowance. Contributions above the limit can create an annual allowance charge, which effectively claws back the tax relief on the excess, although carry forward from earlier years may cover it.

There is also a separate limit on how much you can contribute and still get relief in the first place, which is broadly the higher of your relevant UK earnings or a small basic amount. In other words, you generally cannot get tax relief on contributions larger than your earnings, regardless of the annual allowance.

If you are weighing how much of your saving should go into a pension in the first place, our guide to ISA vs pension: which should you prioritise? walks through the trade-off between the pension's tax relief and the ISA's flexibility.

The tapered annual allowance for high earners

High earners face a reduced annual allowance through a mechanism called tapering. For 2025/26 the taper starts to bite when your adjusted income exceeds £260,000, but only if your threshold income also exceeds £200,000. Both tests matter, which is what makes this area genuinely tricky.

Where the taper applies, the annual allowance falls by £1 for every £2 of adjusted income above the £260,000 threshold, down to a floor of £10,000. So the highest earners may be able to contribute only £10,000 a year with full relief, rather than £60,000.

The complication is in the definitions. Adjusted income broadly includes your total taxable income plus employer pension contributions, while threshold income is roughly your income excluding most pension contributions. Because these definitions are technical and easy to miscalculate, high earners often benefit from professional advice rather than relying on a rule of thumb.

The money purchase annual allowance

Once you start flexibly taking money from a defined contribution pension, a much lower limit can apply to future contributions. This is the money purchase annual allowance, or MPAA, and for 2025/26 it is £10,000.

The MPAA is triggered by drawing taxable income from a pension, for example through flexi-access drawdown or by taking an uncrystallised funds pension lump sum. Simply taking your tax-free lump sum does not usually trigger it. This matters for anyone who dips into a pension while still working, perhaps to bridge a gap, because it can quietly slash how much they can subsequently save with relief. Once the MPAA applies, carry forward cannot be used to lift it for money purchase contributions.

Carry forward

Carry forward is the rule that lets you use unused annual allowance from the previous three tax years, on top of the current year's allowance. It is what makes a large one-off contribution possible without a tax charge, which is especially useful after a bonus, an inheritance or a strong year of self-employed profit.

There are conditions. You must use the current year's allowance first before drawing on earlier years. You must have been a member of a registered pension scheme during the years you want to carry forward from, even if you did not contribute. And, as noted, carry forward cannot be used to exceed the MPAA. Used well, carry forward can allow contributions well above the standard annual allowance in a single year.

The lump sum allowances that replaced the lifetime allowance

For many years a lifetime allowance capped the total anyone could build up across all their pensions before extra tax applied. That lifetime allowance was abolished from April 2024 and replaced by two new limits focused on tax-free cash rather than total pot size.

The first is the lump sum allowance, which caps the total tax-free lump sum you can take across your pensions. The second is the lump sum and death benefit allowance, which is a broader limit covering tax-free lump sums including certain payments on death. This was a significant shift: instead of penalising large pots, the system now limits how much can come out tax-free. Because this area changed recently and remains subject to adjustment, it is exactly the kind of rule to confirm on gov.uk or with an adviser before making decisions.

Why timing matters

Pension planning is as much a timing question as a saving question. A contribution made in one tax year can interact with allowances, thresholds and reliefs differently from the same contribution made a few weeks later in the next year. Spreading contributions across tax years, or bringing them forward to use an allowance before it resets, can change the tax outcome considerably.

This is why understanding the moving parts pays off. You do not need to memorise every figure, but knowing which allowances exist and when they reset helps you avoid accidental charges and make the most of the relief available. When the numbers are large or your situation is complex, professional advice is usually worth its cost.

How WealthView fits

Detailed tax optimisation is specialist territory and belongs with a professional and, on the software side, a dedicated tool such as TaxView. What WealthView does is show your pensions in the context of your wider wealth, so you can see how contributions affect your overall position and long-term projections. It does this privately, on your own device, without an account or a cloud store of your financial data, so you can plan around these allowances while keeping your figures to yourself. The figures in this guide reflect the 2025/26 tax year and can change, so always confirm current allowances on gov.uk before acting.