Written by PensionTaxReliefCalculator Editorial. Reviewed against official UK guidance. Methodology
The £60,000 annual allowance, £10,000 MPAA, £268,275 lump sum allowance and the end of the lifetime allowance, all the limits that govern how much you can put into and take out of a pension.
The standard annual allowance (AA) for 2026/27 is £60,000. This is the maximum total pension input, your contributions, employer contributions and DB accrual, that you can make in a tax year and still receive tax relief. Exceeding the AA triggers an annual allowance charge at your marginal income tax rate. You can reduce or eliminate this charge by using carry-forward allowance from the previous three years.
If you have flexibly accessed a DC pension, the Money Purchase Annual Allowance (MPAA) of £10,000 applies to future DC contributions instead of the standard £60,000. The MPAA cannot be increased by carry forward. This creates a significant planning constraint, once triggered, you can only contribute £10,000 per year to DC pensions. DB accrual is unaffected. The MPAA was increased from £4,000 to £10,000 in April 2023.
For those with adjusted income over £260,000, the annual allowance is tapered downwards. The taper reduces the AA by £1 for every £2 of adjusted income above £260,000 (adjusted income = all income plus employer pension contributions). The minimum AA under tapering is £10,000, reached at £360,000 adjusted income. Threshold income (all income excluding employer pension contributions) must also exceed £200,000 for the taper to apply, if threshold income is below £200,000, the full £60,000 AA applies regardless of adjusted income.
Planning around the tapered AA is complex because employer pension contributions increase adjusted income. For those near the threshold, a large employer contribution can push adjusted income above £260,000 and reduce the available AA. Scheme pays may be necessary if the allowance is unknowingly breached.
Since the lifetime allowance was abolished in April 2024, two new limits control tax-free lump sums. The lump sum allowance (LSA) of £268,275 is the maximum tax-free cash you can take across all lump sum events in your lifetime. If the total of all your pension commencement lump sums (PCLS) and uncrystallised funds pension lump sums (UFPLS) taken as tax-free amounts exceeds £268,275, the excess is taxed at your marginal income tax rate when received.
The lump sum and death benefit allowance (LSDBA) of £1,073,100 is a separate limit covering both lump sums you take yourself and lump sum death benefits paid to your beneficiaries. For most people these limits are academic, a fund of around £1 million is required to approach the LSA (assuming a standard 25% PCLS calculation). But for those with very large pension funds, built up over decades, or through DB scheme commutation, the LSA is a real constraint worth planning around.
Personal pension contributions are also capped at 100% of your relevant UK earnings in the tax year. Relevant earnings include employment income and self-employment profits, but not dividends, rental income or interest. If you earn £40,000 in a year, you can only contribute £40,000 (or £60,000 minus employer contributions, whichever is lower) to receive tax relief. This cap applies to personal contributions only, employer contributions are not subject to the earnings cap, though they still count towards the annual allowance.
Yes. The lifetime allowance (LTA) was abolished from 6 April 2024. Before that date, the LTA was the maximum fund value you could build up in registered pensions without incurring a tax charge (£1,073,100 for 2023/24). The LTA charge was abolished in 2023 and the LTA itself from April 2024. It was replaced by two new lump sum limits: the lump sum allowance (£268,275) and the lump sum and death benefit allowance (£1,073,100).
The lump sum allowance (LSA) of £268,275 is the maximum amount you can take as a tax-free lump sum from your pensions over your lifetime (from 6 April 2024). It replaces the 25% tax-free element under the old LTA. If your 25% of your pension pot exceeds £268,275, the excess is taxed as income. Most people will never reach this limit.
The Money Purchase Annual Allowance (£10,000) is triggered when you flexibly access a defined contribution pension, typically by taking income from flexi-access drawdown, receiving an uncrystallised funds pension lump sum (UFPLS), or annuitising with an enhanced annuity that includes an income guarantee. Taking a tax-free lump sum only (without drawdown), taking a small pot (under £10,000), or taking a DB pension does not trigger the MPAA.