Pension Carry Forward

PHANTOM1125

I get a little confused about the pension carry forward rules. Can someone please help.

If I could give an example based on my own situation with an Aviva defined contribution scheme.

2026-2027 annual salary 60,000 pension contribution so far this year 27,000 Gross (1 off inheritance + higher first contribution) so this year I intend to pay in full 60,000. But based on below can I pay in a lot more and get tax relief?

2025-2026 annual salary 60,000 pension contribution Gross 26,000

2024-2025 annual salary 58,000 pension contribution Gross 10,000

2023-2024 annual salary 57,000 pension contribution Gross 9,000

Many Thanks

NoMore

The amount of tax relief is limited by your relevant UK earnings this year, so your relevant earnings are 60k this year, so the max total amount you can contribute via relief at source is 48k (becomes 60k via tax relief).

If you are ltd company director or can convince your employer to contribute for you, you could use carry forward, as those contributions would not be relief at source so not limited by relevant uk earnings.

PHANTOM1125

Thanks for your reply so carry forward is just not relevant in my situation? Its quite confusing.

QrizB

so carry forward is just not relevant in my situation?

Can you be a little more specific about your situation?

I'm assuming you're an employee, rather than self-employed?

Is your salary exactly £60k?

Does your employer contribute to your pension, and I'd so how much do you expect them to contribute this tax year?

PHANTOM1125

Hi Thanks for the reply. I am employed by a UK company, not self employed. Employer puts in 9% per month and I put in the rest of the contribution which is now 22%. per month. Salary is 59,800 pa.

Thanks very much

Marcon

Are you in a 'Salary sacrifice ' scheme?

PHANTOM1125

Thanks, yes I am

DRS1

So has all £27k of pension contributions gone into the pension via salary sacrifice? And is the £59,800 salary what is left after the salary sacrifice or is it before the salary sacrifice? So are you notionally on £86k?

PHANTOM1125

Hi thanks very much for taking time to reply appreciate that.

So I have just put 20K in directly (inheritance) and one months salary sacrifice so with the tax relief Aviva say it is 27K this year.

£59800 is before SS and tax.

DRS1

So I assume you have got basic rate tax relief on the £20k added to the pension so that would be £25k and the other £2k is employer contributions (salary sacrifice contributions are employer contributions).

If you have more of the inheritance left which you could use for living expenses then would your employer allow you to increase the salary sacrifice? That may be a better way to contribute as you would benefit from some NIC savings.

You can only salary sacrifice down to national minimum wage so you could not get your whole salary into the pension that way but you could get a lot of it in that way. (if the employer allows you to vary the salary sacrifice amount).

DRS1

Just one thought as you asked about tax relief. Some people structure their pension contributions so they get higher rate tax relief - ie enough to get their total taxable income down to the threshold between basic rate tax and higher rate tax. If you think you are going to contribute for only one year and the contributions will mean you effectively pay 0% tax this year but then would revert to paying higher rate tax next year maybe you want to consider spreading the contributions over a number of years so that you can get more years of total taxable income down to just under the higher rate threshold?