Annual allowance

While there is no limit on the amount you can save into your pensions each tax year, there is a limit on the total amount of contributions that can be paid before a tax charge might apply. It is also a limit on the amount of tax relief you can receive on any personal contributions. This is based on your own contributions, any employer contributions and any contributions made on your behalf by someone else.

In the current tax year (2018/19), the standard annual allowance is £40,000 for most people. The annual allowance applies across all your pension savings (excluding State Benefits), not per scheme. If the contributions to your pensions exceed the annual allowance, a tax charge ('the annual allowance charge') may become payable. This effectively claws back any excess tax relief given at source. If your taxable earnings in the year are below the annual allowance then tax relief on pension contributions from all sources is limited to 100% of your earnings (or to £3,600 if you have no earnings).

Your annual allowance may be reduced if you’ve already taken taxable money from your pension pot using the pension freedoms (known as the money purchase annual allowance) or have income of more than £110,000 a year (known as the tapered annual allowance). It may also be possible to contribute more than your annual allowance and still benefit from the tax relief by using unused allowance from up to the three previous tax years (known as carry forward).

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Download our guide to the annual allowance

Read our guide to find out how the annual allowance might affect you.

The value of investments can go down as well as up, and you may get back less than you invest. The eligibility to invest in a pension depends on individual circumstances and all tax rules may change in the future. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser. You will not normally be able to withdraw money from a pension until you are 55.