How much can I pay into a pension?

You can pay as much as you want into a pension.

However, each tax year, you can only get tax relief on your ‘relevant’ earnings or on up to £40,000 – whichever is lower. This £40,000 cap is known as the annual allowance.

Your annual allowance includes all contributions made by you, your employer, or anyone else who pays into your pension(s), as well as any tax relief you receive from the government.

The allowance applies across all pensions you have — it’s not a ‘per pension limit’. The annual allowance does not apply to pension transfers.

Relevant earnings usually include salary and any bonuses, but not dividend income or rental income.

Find out more about pension tax relief.


Annual allowance and drawing your pension

Although your annual allowance is based on your earnings for the year and is capped at £40,000, a lower limit of £4,000 may apply if you’ve already started drawing your pension


Annual allowance and high earners

For the 2016/17 tax year (and onwards), if you have ‘adjusted income’ of more than £150,000, your annual allowance for that same tax year will be tapered, which means that it will reduce depending on your earnings. For every £2 of adjusted income over £150,000, your annual allowance decreases by £1. The minimum annual allowance is £10,000.

However, if your ‘threshold’ income for that year is £110,000 or less, your annual allowance won’t be reduced.

Find out how to calculate your tapered allowance


Annual allowance and carry forward

You can carry forward any unused annual allowance from the three previous years, but the tax relief that you get will be limited to your ‘relevant’ income in the current tax year. You must have been a member of a registered pension scheme (had an existing pension) to use carry forward. Learn more about using carry forward for your pension »


The lifetime allowance

Pensions also have a lifetime allowance which, as of the 2017/18 tax year, is £1,000,000. If the total of all your pension savings exceeds the lifetime allowance when you take benefits a tax charge applies, called the lifetime allowance charge.

The amount of the lifetime allowance charge depends on how you take the excess benefits from your pension. If you take the excess as a lump sum it will be subject to a 55% tax charge. If you use the excess to provide an income it will be subject to an immediate 25% tax charge, and the income you receive will be subject to income tax.

If your total pension savings exceed the new lower limit, you may be able to apply for lifetime allowance protection.

Pensions
Please bear in mind
The value of your pension can fall as well as rise and you may get back less than you invest. Pension rules apply and tax rules may change in future. Please note that during any transfer, your investments will be out of the market. If you need help with pensions, seek independent financial advice.