Carry forward - worked examples

These examples are for financial advisers only. They mustn’t be distributed to, or relied on by, customers. They are based on our understanding of legislation at the date of publication.

All examples assume the following:

  • all pension input periods run in line with the tax year,
  • the money purchase annual allowance doesn’t apply, and
  • there’s been no benefit accrual or contributions paid under any other registered pension schemes during the period covered.

For further information about Carry Forward, see our Carry Forward FAQ - https://www.aegon.co.uk/support/faq/pension-technical/carry-forward-faq.html

Liam made a large contribution to his personal pension plan in June 2015, carrying forward some unused annual allowance from the 2013/14 tax year. It’s now tax year 2017/18 and he wants to know how much unused annual allowance he can carry forward because he’s planning on making another large personal contribution. The Tapered Annual Allowance (TAA) doesn’t apply to him. The table below shows his pension input amounts for the pension input periods ending in the previous four tax years:

PIP ends in tax year Annual allowance Pension input amount Available to carry forward Total amount available to carry forward to 2016/17 Total amount to carry forward to 2017/18
2013/14 £50,000 £20,000 £30,000 £30,000 n/a
2014/15 £40,000 £20,000 £20,000 £50,000 £20,000
2015/16 MTY1 £80,000 £100,000* Nil to MTY2 £30,000 £20,000
2015/16 MTY2 £0.00 £5,000 Nil £25,000 £20,000
2016/17 £40,000 £20,000 £20,000 £40,000

*Liam used £20,000 of the unused annual allowance from tax year 2013/14 to cover the contribution in mini tax year 1, so no annual allowance charge was incurred. This reduced the cumulative carry forward amount to £30,000.

He then used up another £5,000 of the unused annual allowance available for carry forward in mini tax year 2.

He then made another contribution of £20,000 in tax year 2016/17. This means he has £40,000 unused annual allowance available for carry forward into 2017/18. When added to the £40,000 annual allowance for 2017/18, this means he’ll be able to contribute up to £80,000 gross to his pension, without incurring an annual allowance tax charge.

Although the carry forward from 2013/14 (more than 3 tax years ago) doesn’t affect whether there is a tax charge in tax year 2017/18, it does help when looking at the previous three tax years as to whether there should have been an annual allowance charge or not in those earlier tax years. 

Stella is subject to a TAA of £25,000 in 2016/17 and £17,000 in 2017/18. The table below shows her pension input amount for the last few years, and demonstrates how much she can carry forward into 2017/18 to minimise the effects of the taper:

PIP ends in tax year Annual allowance TAA Pension input amount Total amount available to carry forward
2014/15 £40,000 N/A £40,000 Nil
2015/16 (MTY1) £80,000 N/A £25,000 £40,000 to MTY2 only
2015/16 (MTY2) £40,000 carried forward from MTY1 N/A £35,000 £5,000
2016/17 £40,000 £25,000 £23,000 £7,000
2017/18 £40,000 £17,000 Up to £24,000

Stella can carry forward £5,000 from 2015/16 and £2,000 from 2016/17, so she can contribute up to £24,000 in 2017/18 without suffering an annual allowance tax charge. 

Oliver is a member of his employer’s GPP scheme, and both he and his employer pay 10% into the scheme. He has recently had a promotion and he’ll earn £160,000 this year (2018/19) and he wants to know how the TAA will affect him. The TAA hasn’t applied to him previously. He also needs to know if he’ll be able to carry forward any unused annual allowance from 2015/16, 2016/17 and 2017/18 to allow him to continue to contribute 10% without incurring an annual allowance charge, if a taper applies. Oliver confirms that his adjusted income is £176,000 and his threshold income is £144,000.

Oliver will be affected by the TAA. His adjusted income is £26,000 over the £150,000 limit, so his annual allowance will be reduced by £13,000. His 2018/19 TAA will be £27,000.

The total contribution made by Oliver and his employer will be £32,000, so he will incur an annual allowance charge on £5,000 unless he can carry forward some unused annual allowance from any of the previous three years. His pension provider gives him the following information about the pension input amounts for the pension input periods ending in the previous three years:

PIP ends in tax year Annual allowance Pension input amount Available to carry forward Total amount available to carry forward
2015/16 MTY 1 £80,000 £4,000 £40,000 to MTY2
2015/16 MTY 2 £40,000 carried forward from MTY1 £6,000 £34,000 £34,000
2016/17 £40,000 £10,500 £29,500 £63,500
2017/18 £40,000 £12,000 £28,000 £91,500

Oliver and his employer can continue to pay 10% of his salary into the GPP in 2018/19, because he has ample unused annual allowance available to carry forward. The £32,000 total gross contribution will be split as £27,000 for his TAA for 2018/19 and £5,000 carry forward from 2015/16. 

In tax year 2018/19, Barry’s employer wishes to pay in a large contribution for him to recognise all his hard work. They wish to pay in £50,000 as a single contribution. A monthly contribution of £340 is also being paid on the 1st of each month and has been for the last four years. They also paid in a lump sum of £50,000 in tax year 2015/16 (MTY 2) and 2016/17.

PIP ending in tax year: Annual allowance Pension input amount Available to carry forward Total amount available to carry forward
2014/15 £40,000 £4,080 £35,920 £35,920
2015/16 (MTY 1) £80,000 £1,020 £40,000 to MTY2 only -
2015/16 (MTY 2) £40,000 carried from MTY 1 £53,060 Nil £22,860
2016/17 £40,000 £54,080 Nil £8,780
2017/18 £40,000 £4,080 £35,920 £35,920 (Carry forward from 2014/15 has dropped away)
2018/19 £40,000 £54,080 Nil £21,840

Although the carry forward from 2014/15 (more than 3 tax years ago) doesn’t affect whether there is a tax charge in tax year 2018/19, it does help when looking at the previous three tax years as to whether there should have been an annual allowance charge or not in those earlier tax years.

Luca is subject to a TAA in the 2019/20 tax year. He wants to know whether he has any unused annual allowance available to use in this tax year to maximise his contribution. He has already made the maximum contribution for his TAA in the tax year. 

PIP ending in tax year: Annual allowance Pension input amount Available to carry forward Total amount available to carry forward
2016/17 £17,500 £17,500 £0 £0
2017/18 £15,000 £10,000 £5,000 £5,000
2018/19 £12,000 £12,000 £0 £5,000
2019/20 £10,000 £15,000 Nil Nil

Luca can carry forward £5,000 from 2018/19, so he could contribute an extra £5,000, giving a total contribution of £15,000 that can be paid for 2019/20 without attracting an annual allowance tax charge.

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