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You can carry forward unused annual allowance from the three previous years when making pension contributions. Find out how to get started in this free guide.


Pension carry forward

Pension carry forward rules for the current year

Although annual pension contributions are capped at £40,000, carry forward rules allow investors to potentially pay in more than this (as long as you have enough earnings in the current tax year). You can do this by carrying forward unused allowance from the three previous tax years and using it to make pension contributions in the current year.

As with other pensions, under carry forward rules you do not get tax relief on any contributions in excess of your earnings for the current year. You will also need to have had a pension in place in any year from which you are carrying forward your unused allowance, but you don’t need to have made any recent contributions and your new contribution does not need to be paid into the same pension.

How does it work in practice?

To help illustrate carry forward we will look at Mr Smith – a fictional investor in his 40s. He earns £170,000 a year and has made the following pension contributions over the last few years:

Year Contribution Unused annual allowance
2013/14 £20,000 £30,000
2014/15 £30,000
£10,000 £30,000
2016/17 None so far £30,000 (tapered annual allowance)
Total £60,000 £100,000

Mr Smith can carry forward £70,000 of unused allowance from the past three tax years. If he uses his full £30,000 tapered annual allowance for 2016/17, he could make a gross pension contribution of up to £100,000 this year and still receive tax relief.

However, pension carry forward rules can be complex – especially when it comes to tax relief. You should speak to a financial adviser if you are interested in carry forward.

Do you need help with your pension investments?

Some higher earners or people with more complicated financial requirements could benefit from the help of an expert. As part of the Tilney Bestinvest group we can offer you in-house financial planning and investment management services to make your money go further. For more information on how we could help with your pension investments, get in touch on 020 7189 2400 or by booking a free consultation today.

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