Catch up on missed pension payments

with carry forward

In a nutshell


Most people can put up to £40K into their pension each year, money known as their annual pension allowance.


It’s often assumed that if you don’t use all your annual pension allowance for a particular year, it’s gone for good.


Not so; an often overlooked facility called carry forward means you can use any surplus allowance from the previous three tax years...

04 make up for lost time or missed contributions so your pension is always in great shape.

Please note, the information presented in this page is for illustrative purposes only and does not constitute tax advice or recommendations.

Find out about Nutmeg pensions and what they could do for you
Explore now

With investment, your capital is at risk. Tax treatments apply.

Meet John


He earns a base salary of £100K and has just received a generous bonus of £80K.


A colleague mentions carry forward and explains how John could still make use of surplus pension contributions from the last two years.


It turns out that John has £80K of spare personal allowance to play with. He decides to put his full bonus into his pension and we add tax relief of £20K, bringing his gross contribution to £100K.


Following our advice, he uses this year’s allowance of £25K (reduced from the £40K allowance due to pension tapering rule - see ‘in more detail’ section below), leaving £75K which is covered by two years’ of unused allowance. Result.

Find out about Nutmeg pensions and what they could do for you.
Explore now

With investment, your capital is at risk. Tax treatments apply.

In more detail

Your pension could be your main income in later life, so it's important you put in as much as possible while you’re still earning.

One of the great things about using your pension as a form of investment is that unlike, say, an ISA, you can carry forward any unused personal annual allowance from the three previous tax years - good news for anyone who hasn’t maxed out their pension investments recently but would like to now. 

You can’t get tax relief greater than your income for the current year. So although you may be able to claim 3 x £40K, if you're earning £60K you’ll only get tax relief on this amount (which is still more than the £40K you’d be able to claim on without carry forward).

If you’re lucky enough to be a high earner then there’s also the issue of pension tapering. From the beginning of the tax year 2016/17, for every £2 your adjusted income goes above £150K, your annual allowance for that year will drop by £1 - hence the name “tapering”. The drop is limited so that your minimum tapered annual allowance is £10K. The easiest way to work out your own tapered annual allowance is to follow HMRC’s guidance here.

The key thing to remember is, if you want to max out your pension contribution in a particular year, check if you have any unused annual allowance from the previous three years. To find out what carry forward could mean for you just get in touch. That's what we're here for.

Consolidating your pensions with Nutmeg

See our full range of Nuggets

It's the easy way to understand all the financial stuff you feel you should know but somehow missed.

See our full range of financial products and what they could do for you.
Explore now