The annual allowance, explained
How the annual allowance measures the growth in a public service pension, the £60,000 standard allowance, why a pay rise can push you over, carry forward, the taper, and reporting a charge through Self Assessment.
1 min 30 s · Captions · Official sources checked 30 September 2026 · Published
Transcript
The annual allowance is the most your pension savings can grow in a tax year before you have to pay tax. For a public service pension, what counts is the growth in the value of your pension, not the contributions you pay.
Since April 2023, the standard allowance has been £60,000 a year, and it covers all your pensions together.
To measure growth, your yearly pension is multiplied by sixteen, and any separate lump sum is added. The value at the end of the tax year is then compared with the start, after allowing for inflation.
That's why a large pay rise, such as a promotion, can push your growth over the allowance, especially if you have long service.
Anything over the allowance is added to your taxable income, and taxed at the rates that apply to you.
Unused allowance from the previous three tax years can be carried forward, if you were in a registered pension scheme in those years. And for the highest earners, the allowance can be tapered, down to a minimum of £10,000.
If you go over, you report it on a Self Assessment return, even if your scheme pays the charge. For 2025 to 2026, the online deadline is 31 January 2027.
To see whether the annual allowance could affect you, start with Remedy's free check at remedy.tax.