What is the annual allowance?

The annual allowance is the amount of pension contributions you can make each year that will benefit from tax relief. This is £60,000 for the current tax year (2024/25) and includes all contributions made by you, your employer or any third party across all pensions you have. There may be a tax charge to pay if the total contributions exceed this amount. 

However, if you've flexibly accessed your pension pot, for example, if you've taken an uncrystallised funds pension lump sum (UFPLS) or taken income as drawdown, a reduced annual allowance of £10,000* will apply to any future pension contributions. This is known as the Money Purchase Annual Allowance (MPAA).

*The MPAA is £10,000 for the current tax year and only applies to defined contribution pensions. 

You can read more about the MPAA at MoneyHelper.

If you earn over £260,000, you may be affected by the tapered annual allowance. This restricts pensions tax relief by introducing a tapered reduction in your annual allowance.

The value of any tax relief depends on your individual circumstances. This information is based on our understanding of current taxation law and HM Revenue & Customs' (HMRC) practice, which may change.

Find out more information on the annual allowance limits and when the reduced limits apply.