Pension Carry Forward: How Does It Actually Work?
Pension carry forward allows you to use unused annual allowance from the previous three tax years.
The key point is that carry forward increases your available annual allowance, but it does not increase the amount of earnings available to support a personal pension contribution.
How Carry Forward Works
For 2026/27, the standard annual allowance is £60,000.
If you did not use your full annual allowance in the previous three tax years, you may be able to carry the unused amount forward.
For example:
2023/24 unused allowance: £30,000
2024/25 unused allowance: £20,000
2025/26 unused allowance: £10,000
2026/27 annual allowance: £60,000
This would give you up to £120,000 of available annual allowance in 2026/27.
You generally need to have been a member of a registered pension scheme in the year from which the allowance is being carried forward.
Carry Forward Does Not Carry Forward Earnings
This is the part that often causes confusion.
Personal pension contributions that receive tax relief are generally limited to 100% of your relevant UK earnings in the current tax year.
Previous years' earnings cannot be carried forward.
Suppose you have:
£110,000 of available annual allowance
£100,000 of relevant UK earnings
Your maximum tax-relievable personal contribution would normally be £100,000 gross, not £110,000.
The £110,000 figure tells you how much annual allowance is available.
The £100,000 figure tells you how much you can personally contribute and receive tax relief on.
These are two separate tests.
Personal Pensions Versus Occupational Schemes
How tax relief is actually received depends on the pension arrangement.
With a personal pension using relief at source, you normally pay a net contribution and the pension provider claims basic-rate tax relief from HMRC.
For example:
£8,000 paid personally + £2,000 claimed by the provider = £10,000 gross contribution
If you are a higher- or additional-rate taxpayer, you may then need to claim the additional relief from HMRC, either through Self Assessment or by asking HMRC to adjust your tax code.
Many occupational pension schemes instead use a net pay arrangement. Your contribution is deducted from salary before Income Tax is calculated, so you automatically receive tax relief at your marginal rate through payroll. There is normally no separate higher-rate relief claim to make.
This can make occupational schemes using net pay administratively cleaner, particularly for higher- and additional-rate taxpayers.
Not every workplace pension uses net pay, however. Some use relief at source, so it is important to check how the particular scheme operates.
What About Employer Contributions?
Employer pension contributions are not restricted by the employee's relevant UK earnings in the same way as personal contributions.
This means an employer contribution could potentially take total pension saving above the employee's salary, provided sufficient annual allowance is available.
Carry forward can therefore be particularly useful where an employer wants to make a large pension contribution.
Which Allowance Is Used First?
The current year's annual allowance is used first.
If more allowance is needed, unused allowance is then used from the oldest available tax year first.
This helps prevent older unused allowance from expiring.
The Simple Rule To Remember
Carry forward = increases available annual allowance.
Relevant UK earnings = limit personal contributions that can receive tax relief.
You can carry forward unused allowance.
You cannot carry forward unused earnings.