Planning for retirement can often feel like wading through a sea of complex rules and shifting figures. For many in the UK, one key concept that frequently causes confusion is the carry forward pension allowance.
Imagine this scenario. You’ve had a few lower-income years or simply didn’t maximise your pension contributions in recent tax years.
Now your income has increased, and you’re eager to catch up. Can you? The good news is: yes, you can. That’s exactly where carry forward comes into play.
In 2025, understanding how to utilise this rule effectively could help boost pension savings and secure generous tax relief. However, not everyone qualifies, and there are detailed rules you must follow.
Let’s decode the complexities and help maximise every pound going into your retirement.
What Is Carry Forward Pension?
Carry forward allows individuals to make use of any unused annual pension allowance from the previous three tax years. In simple terms, if someone didn’t contribute up to their annual limit in earlier years, they can carry that unused portion into the current year, provided they meet certain conditions.
How Much Can Be Carried Forward?
For the 2025/26 tax year, the standard annual allowance is £60,000. If this is not fully used in a given year, the leftover amount can be carried forward for up to three years.
For example, if you contributed only £10,000 in 2022/23 when the annual allowance was £40,000, you’d have £30,000 unused. If similar under-contributions occurred in subsequent years, the total could be substantial.
Earnings Requirement
An essential point is that your total contributions (your own plus employer and tax relief) cannot exceed your UK relevant earnings for the current tax year. So, to contribute £80,000 in total, one must earn at least £80,000 in the same year.
Registered Pension Scheme Requirement
Another condition is that you must have been a member of a registered pension scheme during each tax year you intend to carry forward from. This excludes only the State Pension.
What Are the HMRC Rules on Pension Carry Forward?
The HMRC has laid out specific rules for using the carry forward allowance to ensure that taxpayers follow proper limits while still benefiting from available tax relief.
Annual Allowance Limits
- 2022/23: £40,000
- 2023/24: £60,000
- 2024/25: £60,000
- 2025/26: £60,000
All contributions, including those made by an employer and tax relief, count toward the annual limit.
Carry Forward Requirements
To use carry forward, the individual must:
- Fully use their current year’s annual allowance
- Be part of a registered pension scheme in all the years being carried from
- Not have triggered the Money Purchase Annual Allowance (MPAA)
Tapered Annual Allowance
For high earners, typically those with income over £200,000, the annual allowance might be tapered down to as low as £10,000. This taper affects how much allowance is available to be carried forward.
How Does Carry Forward Work in Practice?
Carry forward can be used to offset tax charges if your pension contributions exceed the standard annual allowance.
Let’s look at a simplified scenario.
Before Using Carry Forward
| Tax Year | Annual Allowance | Paid into Pension | Unused Allowance |
| 2025/26 | £60,000 | £95,000 | -£35,000 |
| 2024/25 | £60,000 | £14,000 | £46,000 |
| 2023/24 | £60,000 | £12,000 | £48,000 |
| 2022/23 | £40,000 | £10,000 | £30,000 |
After Applying Carry Forward
| Tax Year | Annual Allowance | Paid into Pension | Unused Allowance |
| 2025/26 | £60,000 | £95,000 | £0 |
| 2024/25 | £60,000 | £14,000 | £46,000 |
| 2023/24 | £60,000 | £12,000 | £43,000 |
| 2022/23 | £40,000 | £10,000 | £0 |
This example demonstrates how the unused allowances from the past three years can neutralise what would have been an over-contribution this year.
What Are the Income Requirements to Use Carry Forward?
Understanding the income requirement is crucial for determining how much you can contribute using carry forward.
UK Relevant Earnings
Your total contributions must not exceed your UK relevant earnings for the tax year. This includes:
- Salary
- Bonuses
- Commission
- Self-employed income
It does not include income from dividends, rental properties, or savings.
Contribution Scenarios
Employee Example
If an individual earns £85,000 and contributes £75,000 of their own money, while the employer adds £20,000, total contributions equal £95,000. This is allowed because the personal contribution doesn’t exceed the earned income.
Self-Employed Example
A self-employed person earning £95,000 must ensure their total contributions (since there are no employer contributions) don’t exceed this figure.
Carry Forward Pension Allowance – Latest News?
As of 2025, several updates and insights affect how carry forward is applied in practice.
Key Updates
- The standard annual allowance remains at £60,000 for 2025/26.
- Tapered annual allowance still applies for incomes over £200,000.
- The MPAA, triggered by flexible access to pension pots, reduces the allowance to £10,000. Those subject to the MPAA cannot use carry forward.
Market Insights
Advisers from Scottish Widows and Royal London suggest that more individuals are exploring carry forward due to increasing income stability post-COVID.
It is particularly relevant for directors, freelancers, and those who delayed contributions during economic uncertainty.
What Happens If You Exceed the Annual Allowance?
If contributions exceed the annual allowance and you are not eligible to use carry forward, a tax charge known as the Annual Allowance Charge will apply.
Tax Treatment
- The excess amount is added to your taxable income.
- HMRC applies tax at your marginal rate.
Avoiding the Charge
By applying unused allowances from the past three years, one can eliminate or reduce the tax charge. This requires keeping accurate records and potentially seeking advice.
Who Can and Cannot Use Carry Forward?
While the carry forward rule is generous, it doesn’t apply to everyone.
Eligible Individuals
- Must be part of a registered pension scheme
- Must not have triggered MPAA
- Must have UK relevant earnings equal to or above the contribution amount
Not Eligible
- Those drawing a flexible income from a defined contribution scheme
- Individuals with no UK earnings but wanting to contribute large amounts
What Is the Role of Employer Contributions in Carry Forward?
Employer contributions form an essential part of the annual allowance calculation.
Key Considerations
- Both employee and employer contributions count toward the £60,000 limit.
- Employer contributions are not restricted by the employee’s earnings.
- However, the total must still fall within the annual allowance plus any carried forward amount.
Real-life Example
If a company contributes £50,000 and the employee adds £30,000, the total is £80,000. This is permissible if the individual earns £30,000 and has £20,000 carried forward from previous years.
What Tools Help Track Unused Pension Allowance?
Keeping track of unused allowances is vital for effective carry-forward planning.
HMRC Pension Checker
Accessible through GOV.UK, this tool helps individuals check their pension input amounts over several years.
Provider Platforms
Platforms like HL, Royal London, and Scottish Widows offer online calculators that:
- Assess carry forward eligibility
- Estimate how much allowance is available
- Flag tapered allowance scenarios
Benefits of Monitoring
- Avoid accidental over-contributions
- Optimise pension tax relief
- Plan future financial years efficiently
What Should You Consider Before Using Carry Forward?
Despite its benefits, there are several things to consider before taking advantage of carry forward.
Strategic Planning
- Ensure you’ve fully used your current year’s allowance
- Confirm all prior years’ contributions and limits
- Double-check the UK relevant earnings
Financial Advice
Given the complexity, many pension providers recommend speaking to a financial adviser. Missteps can result in tax penalties or missed savings opportunities.
Conclusion
The carry forward pension allowance is an underutilised yet powerful tool in retirement planning. With annual limits, tapered rules, and tax implications, understanding how to apply it can make a meaningful difference in pension growth.
By ensuring eligibility, accurately tracking contributions, and using available tools, UK individuals can boost their retirement funds while enjoying valuable tax relief.
Whether you’re catching up after a few lean years or strategically leveraging your income peak, carry forward offers an opportunity to get back on track toward a financially secure retirement.
FAQs
What is the carry forward pension rule?
Carry forward allows individuals to use unused pension allowance from the past three tax years if they meet certain conditions.
Can I use carry forward without earnings?
No, personal contributions must not exceed your UK relevant earnings for the current tax year.
Does carry forward apply to employer contributions?
Yes, employer contributions count toward the total annual allowance that may be carried forward.
What happens if I exceed my allowance and don’t qualify for carry forward?
You will face an annual allowance tax charge on the excess contributions.
How do I check if I have unused allowance?
You can use the HMRC pension checker or tools provided by your pension provider to verify previous contributions.
Can I use carry forward after triggering MPAA?
No, once MPAA is triggered, you cannot use carry forward for defined contribution pensions.
What is the current annual allowance for 2025/26?
The annual allowance remains at £60,000 for most individuals for the 2025/26 tax year.
