SIPP Carry Forward: How to Use 3 Years of Unused Pension Allowance

Carry forward lets you use unused annual allowance from the previous three tax years to make a larger pension contribution in the current year. If you have not used your full £60,000 allowance in recent years, you could contribute well over £60,000 in a single year, up to a theoretical maximum of £240,000. This guide explains the rules, eligibility requirements, and practical scenarios where carry forward is most useful.

What Is Carry Forward?

The standard annual allowance for pension contributions is £60,000 for 2024/25. If you do not use the full £60,000 in a given tax year, the unused portion can be carried forward for up to three years. In the fourth year, any remaining unused allowance from that earliest year expires.

Carry forward allows you to make a single large contribution that exceeds the current year's £60,000 limit, as long as you have unused allowance from previous years to draw on. You must use the current year's allowance first, then work backwards through the previous years, starting with the oldest.

The maximum theoretical contribution using carry forward is £240,000 in one year: £60,000 from the current year plus £60,000 from each of the three previous years. In practice, the amount you can contribute is also limited by your earnings (explained below).

Eligibility: Who Can Use Carry Forward

To carry forward unused allowance from a previous tax year, you must have been a member of a registered pension scheme during that year. This includes any UK-registered pension: a workplace pension, a SIPP, a stakeholder pension, or a personal pension. The type of scheme does not matter, and you do not need to have made any contributions during that year. You just need to have been enrolled.

If you were enrolled in a workplace pension through auto-enrolment but opted out after a month, you were still a member during that period. If you had a SIPP open with zero contributions, you were still a member. The bar is low: membership of any registered scheme in each year you want to carry forward from.

If you were not a member of any registered pension scheme in a particular year, you cannot carry forward unused allowance from that year. This is relevant for people who were self-employed without a pension, living abroad, or simply had no pension arrangement in place.

How Carry Forward Works: Step by Step

The calculation follows a specific order:

1. Start with the current tax year's annual allowance (£60,000 for 2024/25). Use as much of this as your contribution requires.
2. If your contribution exceeds the current year's allowance, carry forward unused allowance from the oldest available year first (three years ago).
3. Then use unused allowance from two years ago, then one year ago.
4. Any contribution that exceeds the total available allowance (current year plus carried forward) triggers an annual allowance charge.

The annual allowance for previous years uses the limit that applied in that year. For recent years, the allowance has been:

• 2024/25: £60,000
• 2023/24: £60,000
• 2022/23: £40,000
• 2021/22: £40,000

If you are making a carry forward contribution in 2024/25 and drawing on 2021/22 allowance, the unused amount from that year is based on the £40,000 limit that applied then, not the current £60,000.

The Earnings Limit

Tax relief on pension contributions is limited to 100% of your relevant UK earnings in the current tax year. This is a separate limit from the annual allowance and applies regardless of how much carry forward you have available.

If you earn £80,000 in the current year and have £200,000 of available allowance (current year plus carry forward), you can only get tax relief on £80,000 of contributions. You could technically contribute more, but the excess above your earnings would not receive tax relief and would count against your annual allowance without the tax benefit.

Relevant UK earnings include employment income, trading income, and patent income. They do not include investment income, rental income, or pension income. If you have no relevant UK earnings (for example, you are retired and living on pension income), you can still contribute up to £3,600 gross per year to a pension with basic rate tax relief, but you cannot use carry forward for larger amounts.

Employer contributions do not count against the earnings limit (they count against the annual allowance but not the earnings cap). So if your employer contributes £20,000 and you earn £80,000, you can personally contribute up to £80,000 on top of the employer's £20,000, as long as the total does not exceed your available annual allowance.

Worked Example

Sarah earns £95,000 per year. She has been a member of her workplace pension scheme throughout, contributing 5% with a 3% employer match. Her total annual pension contributions have been £7,600 per year (8% of £95,000). She wants to make a large one-off contribution in 2024/25 after receiving an inheritance.

Her available allowance:

Sarah's total available allowance for 2024/25 is £52,400 (current year unused) + £32,400 + £32,400 + £52,400 (carried forward) = £169,600. However, her earnings limit is £95,000, so she can only get tax relief on up to £95,000 of personal contributions in the current year.

She already has £7,600 in regular contributions for 2024/25. She can make an additional lump sum contribution of up to £87,400 (£95,000 earnings limit minus £7,600 already contributed) and receive full tax relief. As a higher rate taxpayer, the tax relief on an £87,400 contribution is £34,960 (40% of £87,400), making her net cost £52,440.

The total contributions for the year (£95,000) are within her available annual allowance of £169,600, so there is no annual allowance charge.

Tapered Annual Allowance for High Earners

If your adjusted income exceeds £260,000, your annual allowance is reduced by £1 for every £2 above that threshold. The minimum tapered allowance is £10,000, which applies at adjusted income of £360,000 or above.

Adjusted income includes your total taxable income plus employer pension contributions. The taper only applies if your threshold income (income excluding pension contributions) also exceeds £200,000.

The taper affects carry forward calculations because the unused allowance from a tapered year is based on the tapered amount, not the standard £60,000. If your tapered allowance was £30,000 in a previous year and you contributed £10,000, your unused carry forward from that year is £20,000.

For a full explanation of how the taper interacts with other tax relief mechanisms, see our pension tax relief guide.

How to Check Your Unused Allowance

To calculate your available carry forward, you need to know your total pension contributions (employee, employer, and any personal contributions) for each of the previous three tax years. There are several ways to find this information:

• Pension provider statements: your annual pension statement shows total contributions for the year. If you have multiple pensions, you need statements from each one.
• Payslips: your payslip shows your employee contribution and often the employer contribution. Multiply the monthly figure by 12 (or add up all payslips for the year if your salary changed).
• P60: your end-of-year P60 shows total pension contributions deducted from your salary.
• HMRC: you can check your pension savings through your personal tax account on the HMRC website, though the data may not include all employer contributions.

If you are planning a large carry forward contribution, consider speaking to a financial adviser or accountant who can verify your calculations and ensure you do not accidentally exceed your available allowance.

Common Scenarios for Carry Forward

Carry forward is most useful in situations where you have a lump sum available and want to shelter it from tax:

• Received a large bonus: rather than paying 40% or 45% income tax on a bonus, you can divert it into your pension and receive full tax relief (subject to your available allowance and earnings limit).
• Sold a business or property: if the proceeds count as relevant earnings (trading income from a business sale, for example), you can use carry forward to make a large pension contribution and reduce your tax bill.
• Received an inheritance: while the inheritance itself is not earnings, if you have sufficient employment or trading income in the current year, you can use the inherited money to fund a pension contribution and claim tax relief against your earnings.
• Returning to work after a break: if you were a member of a pension scheme during your career break (even with zero contributions), you can carry forward the unused allowance from those years when you return to work and have earnings again.
• Catching up after years of low contributions: if you spent your early career contributing only the auto-enrolment minimum, carry forward lets you make up for lost time once your income increases.

For strategies on making additional pension contributions beyond carry forward, see our pension top-up guide.