If you didn't use your full annual allowance in previous years, you may be able to carry it forward and make larger contributions now. Here's how it works.
What is carry forward?
Carry forward allows you to use any unused annual allowance from the previous three tax years, on top of your current year's allowance.
Eligibility
To use carry forward, you must:
Have been a member of a registered pension scheme in each of the years you want to carry forward from
Have unused allowance in those years
Use your current year's allowance first
How it works
Unused allowance from older years is used first. For example, if you want to contribute more than £60,000 this year:
First, use this year's £60,000 allowance
Then, use any unused allowance from three years ago
Then, two years ago
Finally, last year
When is carry forward useful?
Carry forward can be useful if you:
Receive a bonus and want to put a large amount into your pension
Have an inheritance or other lump sum
Want to catch up after years of lower contributions
Are planning ahead for retirement
Earnings limit still applies
Even with carry forward, you can only get tax relief on contributions up to 100% of your UK earnings in the tax year you're contributing. The carry forward rules allow you to exceed £60,000, but not your earnings.
MPAA and carry forward
If you've triggered the Money Purchase Annual Allowance (MPAA), you cannot use carry forward for defined contribution pension contributions.
Calculating your carry forward
Working out exactly how much carry forward you have available can be complex. You'll need to know your total pension contributions (including employer contributions) for each of the last three years. A financial adviser or accountant can help with this calculation.
Still need help?
If you have questions about carry forward, contact us at hello@joinchest.com. For specific tax advice, we recommend speaking to a tax adviser.