UK Pension Annual Allowance 2024/25: How Much Can You Contribute?

The pension annual allowance is the maximum you can contribute to your pension each year while still receiving tax relief. For most people in 2024/25, this is £60,000 — but there are important exceptions.

What is the annual allowance?

The annual allowance (AA) is the total amount that can be contributed to all your pension schemes in a tax year — including:

• Your own contributions (employee)
• Your employer's contributions
• Any additional voluntary contributions (AVCs)

Contributions above the annual allowance are subject to an Annual Allowance Charge — effectively a tax that claws back the relief you received.

The 2024/25 annual allowance

The standard annual allowance is £60,000 for 2024/25. This was increased from £40,000 in April 2023.

However, there's also a cap: you cannot contribute more than 100% of your UK earnings in a tax year and receive tax relief.

Example:

• Salary: £45,000
• Annual allowance: £60,000
• Maximum tax-relieved contributions: £45,000 (the lower of the two)

What counts towards the annual allowance?

For defined contribution (DC) pensions (most workplace pensions, SIPPs):

• All contributions count at face value

For defined benefit (DB) pensions (final salary, career average):

• The "pension input amount" is calculated as the increase in the value of your pension × 16, plus any lump sum increase
• This can be complex — check with your scheme administrator

The tapered annual allowance

High earners face a reduced annual allowance. If your threshold income exceeds £200,000 AND your adjusted income exceeds £260,000, your annual allowance is tapered.

How the taper works:

• For every £2 of adjusted income above £260,000, the annual allowance reduces by £1
• The minimum tapered allowance is £10,000

The Money Purchase Annual Allowance (MPAA)

If you've flexibly accessed your pension (e.g. taken income from a drawdown fund), your annual allowance for defined contribution pensions drops to £10,000 — the Money Purchase Annual Allowance.

This is designed to prevent people from recycling pension income back into pensions to gain repeated tax relief.

Carry forward

If you haven't used your full annual allowance in the previous three tax years, you can carry forward the unused amount.

Rules:

• You must have been a member of a registered pension scheme in the year you're carrying forward from
• You must use the current year's allowance first
• Carry forward is applied from the oldest year first

Example:

In 2024/25, you could contribute up to £60,000 + £30,000 + £25,000 + £40,000 = £155,000 (subject to earnings cap).

Salary sacrifice and the annual allowance

Salary sacrifice contributions count towards the annual allowance as employer contributions (because the employer makes the payment directly to the pension).

This doesn't change the total allowance — it still counts the same way. But it's worth noting when calculating your total pension input.

What happens if you exceed the annual allowance?

If you exceed the annual allowance, you'll receive an Annual Allowance Charge. This is calculated at your marginal income tax rate on the excess.

You can ask your pension scheme to pay the charge from your pension pot (known as "scheme pays") if the charge exceeds £2,000 and the excess is over £10,000.

How to check your pension contributions

1. Check your payslip for employee and employer contribution amounts
2. Log in to your pension provider's online portal
3. Request a pension statement from your scheme administrator
4. For DB pensions, request a pension input statement

Summary

• The standard annual allowance is £60,000 in 2024/25
• Contributions above this face a tax charge at your marginal rate
• High earners above £260,000 adjusted income face a tapered allowance (minimum £10,000)
• Unused allowance from the past 3 years can be carried forward
• Flexibly accessing your pension reduces the allowance to £10,000 (MPAA)