This guide is for financial advisers only. It mustn't be distributed to, or relied on by, customers. It is based on our understanding of legislation as at December 2024.
Overview
‘Carry forward’ may allow contributions in excess of the standard annual allowance to be paid without incurring a tax charge. This could be attractive to individuals who have received a large salary increase, whose profits have been good in a self-employed business, who have been made redundant, or who are approaching retirement.
It works by ‘carrying forward’ unused annual allowance from earlier tax years. The individual must have been a member of a registered pension scheme in the tax year from which the unused allowance is being carried forward. For this purpose, ‘member’ includes active, deferred and pensioner members. This means that it’s not necessary for contributions to have been paid, or benefit accrued, in the carry forward year. Contributions made using carry forward can be paid to any registered pension scheme.
Note that if, on retirement, an immediate annuity was secured in the member’s own name, that annuity is not treated as a registered pension scheme and so cannot be taken into consideration when deciding whether or not carry forward is available. HM Revenue & Customs' (HMRC) guidance on this can be seen here.
Personal contributions (including third-party contributions) made using carry forward are tax relievable up to the greater of £3,600 and the individual’s relevant UK earnings in the tax year that the contributions are paid. Employer contributions are subject to HMRC’s ‘wholly and exclusively’ rules for corporation tax purposes.