Originally published at: How to use carry-forward to boost your pension contributions - InvestEngine Insights
If you’ve got extra income this year and want to maximise your pension contributions, the carry-forward rule could be a powerful tool.
It allows you to use any unused pension allowance from the previous three tax years — and still receive tax relief on those contributions.
Carry-forward is a smart way to catch up on missed payments or invest more in a year when your earnings are higher than usual. Here’s how carry-forward works, who can use it, and what to watch out for.
What is pension carry-forward?
Each tax year, you can contribute up to a certain amount into your pension and get tax relief. This is called the annual allowance. For the 2025/26 tax year, the standard annual allowance is £60,000, or 100% of your UK earnings — whichever is lower.
If you didn’t use your full allowance in any of the previous three tax years, you might be able to carry forward that unused portion into the current tax year. That means you could potentially contribute more than £60,000 this year and still get tax relief on the full amount.
How much can you carry forward?
In theory, if you haven’t used any of your allowance in the last three tax years, you could carry forward up to £180,000 (that’s £60,000 x 3), plus this year’s £60,000, to contribute a total of £240,000 in a single year.
In practice, your limit will depend on how much you earned this year and how much of your allowance you used in each of the past three years.
Note: You can only carry forward from tax years where you were a member of a UK-registered pension scheme, even if you didn’t pay in that year.
How carry-forward works step-by-step
- Start investing into a pension
- First, use your current year’s pension allowance (e.g. £60,000 for 2025/26)
- Apply any unused allowance from the earliest of the three previous years
- Then, apply any unused allowance from the next year, and so on.
You must have been part of a pension scheme during each of those years — but you don’t need to have made any contributions.
You must have enough relevant UK earnings in the current tax year to cover the total contribution you want to make.
Carry-forward in action: an example
Let’s say your pension contributions over the last three years looked like this:
- 2022/23 allowance (£40,000): You contributed £15,000 → £25,000 unused
- 2023/24 allowance (£60,000): You contributed £30,000 → £30,000 unused
- 2024/25 allowance (£60,000): You contributed £10,000 → £50,000 unused
In 2025/26, your earnings are strong, and you want to contribute £150,000.
Here’s how that could break down:
- £60,000 from this year’s standard allowance
- £25,000 from 2022/23
- £30,000 from 2023/24
- £35,000 from 2024/25
That adds up to £150,000 — and you’d still have £15,000 left over from 2024/25 that you could use in future, if eligible.
Who can use carry-forward?
Carry-forward is open to most people who meet a few conditions:
- You’ve already used your current tax year’s allowance
- You were a member of a pension scheme in the years you’re carrying forward from
- You haven’t triggered the Money Purchase Annual Allowance (MPAA) — a rule that reduces your annual allowance to £10,000 if you’ve accessed certain pension benefits
- You have enough earnings this year to match the total contributions you want to make (including carry-forward)
How to use a SIPP to invest for your retirement
Here’s Ramin Nakisa from PensionCraft, as part of InvestEngine’s Education Series, to explain how a SIPP can help people invest for their retirements.
This content is part of a sponsored partnership with InvestEngine. It is for educational purposes only and does not constitute investment advice. Capital at risk.
What if you earn over £200,000?
If your adjusted income is above £260,000 and your threshold income is over £200,000, you may be affected by the Tapered Annual Allowance. This gradually reduces your annual allowance from £60,000 down to a minimum of £10,000.
Even if you’re affected by tapering, you can still use carry-forward — but your unused allowance will be based on your reduced annual limit for each year.
Tax relief on large contributions
One of the biggest advantages of carry-forward is the ability to claim more tax relief in a single year. For example:
- If you’re a basic-rate taxpayer, you’ll get 20% tax relief added automatically
- If you’re a higher- or additional-rate taxpayer, you can claim an extra 20–25% through your self-assessment tax return
That means a £40,000 pension contribution could cost a higher-rate taxpayer just £24,000 after tax relief.
How to report carry-forward contributions
You don’t need to tell HMRC that you’re using carry-forward — but if your total pension contributions go over the standard annual allowance, you’ll need to complete a self-assessment tax return.
- If your contributions exceed your available allowance (after carry-forward), you’ll pay an Annual Allowance Charge on the excess
- In some cases, you may be able to ask your pension provider to pay this charge from your pension pot under a “Scheme Pays” arrangement
If you’re unsure about your limits, consider speaking to a tax professional or financial adviser.
Why carry-forward matters
Carry-forward is especially useful if:
- You’ve had years where you couldn’t contribute much (e.g. parental leave, career breaks)
- Your income has increased and you want to catch up quickly
- You’ve received a windfall — like a bonus, inheritance or business sale
- You’re preparing for retirement and want to boost your pension pot efficiently
It gives you more flexibility to save on your own terms, while still benefiting from valuable tax relief.
Using carry-forward with an InvestEngine SIPP
With an InvestEngine SIPP, you can easily invest your pension contributions into a globally diversified, low-cost portfolio of ETFs.
While we don’t offer personalised financial advice, you’re free to use carry-forward to top up your SIPP — as long as you meet the eligibility criteria.
To set this up:
- Log into your InvestEngine account or open a new one
- Open a SIPP portfolio or head to your in your dashboard
- Make a one-off contribution or set up regular contributions using a Savings Plan
- Track your investment performance anytime through the dashboard
And because our SIPP has no setup or trading fees, more of your money goes towards growing your future.
Using ETFs to invest for your pension
If you’re interested in long-term investing, you might have come across the acronym ETF. Exchange-traded funds, ETFs for short, are traded on the stock market and are similar to other assets like stocks and shares or bonds.
What makes an ETF different is that they generally track a wide number of different companies in one package. The iShares S&P 500 ETF, for example, tracks 500 of the biggest US companies including the likes of Apple, Amazon and Tesla, also known as the S&P 500 Index.
For long-term investors, ETFs can provide the diversification many are looking for. They hold hundreds of individual shares or bonds, helping reduce risk and making them ideal for a long-term portfolio.
It’s important to say that this isn’t investment advice, and anyone unsure on their long-term plan should speak to a financial advisor.
Final takeaways
- Carry-forward lets you use up to three years of unused pension allowance — on top of this year’s limit
- It’s available to anyone with a UK pension scheme and enough relevant earnings
- It’s ideal for higher earners, business owners, and anyone looking to catch up or boost retirement savings
- You can claim tax relief on the full amount (subject to limits) and potentially reduce your tax bill
- Used correctly, carry-forward is one of the most powerful pension planning tools available.
Important information
Capital at risk. ETF costs apply. The value of your investments may go down as well as up, and you may get back less than you invest. This article is for general information only and is not personal financial advice. If you’re unsure, speak to a professional adviser.
Tax treatment depends on your personal circumstances and may be subject to change.