Many UK taxpayers miss out on valuable tax savings simply because they don’t realise they have unused pension allowances.  If you haven’t used your full pension allowance from previous years, you could carry it forward to boost your savings and cut your tax bill. This is known as the carry forward pension allowance, and it can help you make the most of your pension tax relief while maximising retirement savings.

Understanding pension allowances in the UK and how to maximise pension contributions can make a significant difference to your long-term financial health. In this guide, we’ll explain what pension allowances are, how the carry forward rule works and how you can use it to your advantage.

What are pension allowances?

The UK government sets a limit on how much you can contribute to your pension each year, while still benefiting from pension tax relief. This is called the annual allowance, and it currently stands at £60,000 per year (as of the 2025/26 tax year).

However, high earners may have a tapered annual allowance, which reduces their limit if their income exceeds a certain threshold. This makes understanding and tracking your pension contributions even more important.

What is the pension carry forward rule?

If you haven’t used your full pension allowance in the past three tax years, the pension carry forward rule allows you to roll over the unused portion and contribute it in the current tax year. This can significantly boost your pension pot while reducing your tax liability.

Here’s how it works:

  1. You must use up your full annual allowance for the current tax year first.
  2. You can then utilise unused allowances from the previous three tax years.
  3. Contributions are still subject to earnings limits. You cannot contribute more than your total earnings in the tax year you make the contributions.
  4. You still benefit from pension tax relief on your contributions.

How to calculate your unused allowance

To maximise pension contributions using the carry forward rule, you need to calculate how much unused allowance you have from previous years. Here’s how:

  1. Check past contributions – Review your pension statements or speak to your provider.
  2. Compare with annual allowances – For each of the past three years, check how much of the allowance you actually used.
  3. Total your unused allowance – Add up the unused amounts from the three previous tax years.
  4. Factor in your current year’s contributions – You must use the full £60,000 annual allowance first before dipping into carried forward amounts.

Example:

  • 2025/26: You contribute £40,000 (leaving £20,000 unused).
  • 2024/25: You contributed £35,000 (leaving £25,000 unused).
  • 2023/24: You contributed £50,000 (leaving £10,000 unused).
  • 2022/23: You contributed £20,000 (leaving £40,000 unused).

In 2026/27, you could contribute your full £60,000 plus up to £75,000 in carry forward allowances from the past three years – if your earnings allow it.

Who can use carry forward?

Not everyone can take advantage of the carry forward pension rule. To qualify, you must:

  • Have been a member of a UK-registered pension scheme during the tax years you’re carrying forward from (even if you didn’t make contributions).
  • Have earnings that match or exceed your total contributions in the tax year you’re making the payment.
  • Not have already exceeded the lifetime allowance (though this was abolished in April 2023, individual scheme rules may still impose limits).

How much extra can you contribute?

Using carry forward, you can make pension contributions above the annual allowance without triggering penalties, as long as:

  • You haven’t exceeded your earnings for the year.
  • You’re not affected by the tapered annual allowance (which applies to those with adjusted incomes over £260,000).
  • Your pension provider allows for a lump sum contribution of the size you’re planning.

The key benefit of this strategy is increased pension tax relief. If you’re a higher or additional rate taxpayer, you can claim back 40% or 45% relief on contributions above the basic rate threshold, significantly reducing your tax bill.

How to claim pension tax relief

When making contributions using the carry forward rule, pension tax relief applies in the same way as it does for regular contributions:

  • Employer contributions – Your employer can contribute on your behalf, reducing your taxable salary through salary sacrifice.
  • Personal contributions – Basic-rate relief (20%) is automatically added to your pension pot.
  • Higher and additional-rate relief – If you're a higher (40%) or additional rate (45%) taxpayer, you can claim the extra relief through your self-assessment tax return.

For example:

  • A basic-rate taxpayer contributing £10,000 will see £12,500 go into their pension (with £2,500 added in tax relief).
  • A higher-rate taxpayer can claim back an additional £2,500 via their tax return, reducing their tax bill.
  • An additional-rate taxpayer can claim back even more, lowering their overall tax burden significantly.

Maximising your pension strategy

Using the pension carry forward rule is a smart way to maximise pension contributions while reducing your tax liability, but it’s essential to have a plan. Here’s how to make the most of your allowances:

  • Check your past allowances – Make sure you know exactly how much you have available to carry forward.
  • Time your contributions – Consider making lump sum payments before the end of the tax year to maximise relief.
  • Monitor tapered allowance risks – If your income is high, work out whether you’re subject to a reduced annual allowance.
  • Work with a financial adviser – A professional can help you plan your contributions efficiently, ensuring you get the most from your pension while staying compliant with HMRC rules.

Unlock the full potential of your pension with RIFT

Making the most of your unused pension allowances can significantly boost your retirement savings and lower your tax bill – but navigating the rules can be complex. At RIFT, we help you to understand and optimise your tax situation.

Our tax experts can guide you through the pension carry forward process, ensuring you take full advantage of your pension allowances in the UK, while keeping your tax affairs in order.