Finance⏱ 6 min read
How Much Can You Save in a UK Pension? Allowances Explained
The Annual Allowance limits how much you can put into a pension each year — and exceeding it triggers a significant tax charge. Here's exactly how the limits work for 2024/25.
UK pension tax relief is one of the most generous tax breaks available — but it has limits. Exceeding the annual allowance results in a tax charge that wipes out the relief you received. Here's how to stay within the limits.
The Annual Allowance (2024/25)
Standard Annual Allowance: £60,000 per tax year
This includes ALL pension contributions:
- Your own contributions (employee or personal)
- Employer contributions
- Tax relief added by the government
Example: Salary £80,000, employer contributes 10%:
Employee contribution: £8,000
Employer contribution: £8,000
Government tax relief (40% taxpayer): £5,333
Total input: £21,333 — well within £60,000 limit
Tapering for High Earners
For those earning above £260,000 (adjusted income), the annual allowance is progressively reduced — known as the Tapered Annual Allowance:
Taper applies when:
Threshold income (net of pension contributions) > £200,000
AND Adjusted income (gross, including employer contributions) > £260,000
Reduction: £1 less allowance for every £2 of income above £260,000
Minimum tapered allowance: £10,000
Example: Adjusted income £300,000
Excess above £260,000 = £40,000
Reduction = £40,000 ÷ 2 = £20,000
Tapered allowance = £60,000 − £20,000 = £40,000
Carry Forward: Using Unused Allowance
You can carry forward unused annual allowance from the previous THREE tax years.
Rules:
- Must have been a member of a registered pension scheme in each year
- Current year's allowance must be used first
- Can carry forward up to £60,000 per year (or the limit that applied that year)
Example: Selling a business in 2024/25 and want to make large pension contribution
2024/25 allowance: £60,000
Unused from 2023/24: £45,000 (contributed only £15,000)
Unused from 2022/23: £20,000
Unused from 2021/22: £10,000
Maximum contribution: £60,000 + £45,000 + £20,000 + £10,000 = £135,000
Money Purchase Annual Allowance (MPAA)
If you've accessed pension money flexibly (drawdown, UFPLS),
the MPAA applies to defined contribution pensions:
MPAA: £10,000 per year (2024/25)
(Replacing the £60,000 standard allowance for DC contributions)
The full £60,000 allowance still applies to defined benefit pensions.
Carry forward is NOT available with the MPAA.
The Lifetime Allowance: Abolished
The Lifetime Allowance (previously £1,073,100) was abolished from April 2024. There is no longer a limit on the total size of your pension pot. However, the tax-free lump sum at retirement remains capped at £268,275 (25% of the old LTA).
Tax Relief Limits: The Earnings Rule
You can only receive tax relief on contributions up to 100% of your UK earnings in a given tax year (or £3,600 if earnings are lower).
Non-earner (e.g. child or non-working spouse):
Can contribute up to £2,880/year
Government adds 20% basic rate relief: £720
Total into pension: £3,600
This is the most common pension contribution for children or non-earners.