Have a lump sum to invest? How “carry forward” could boost your savings tax-efficiently

Posted on

The generous tax relief available on pensions makes them a great choice for retirement saving.

You usually benefit from an immediate 20% boost to your savings when you make a contribution – meaning a £1,000 contribution only “costs” you £800. If you’re a higher- or additional-rate taxpayer then further relief is normally available through self-assessment.

However, to balance out this generous relief, the Annual Allowance limits the amount of tax-efficient pension savings you can make in an individual year.

In the 2023/24 tax year, the Annual Allowance stands at £60,000, although it could be lower for you if you’re a high earner or you’ve already started to flexibly access your pension (more about this later).

If you have a larger amount to invest – perhaps through a bonus, windfall, a good year’s profits, or because your employer wants to make a large pension contribution – then the “carry forward” rules can allow you to make the most of any unused Annual Allowance from the previous three years.

Read on to find out how carry forward can help you to maximise your pension tax relief.

Carry forward lets you make a larger tax-efficient pension contribution

When the government introduced the Annual Allowance in 2006, pension savers could have benefited from contributions of up to £215,000 without a penalty. This rose to £255,000 by 2010/11.

However, since then, the Annual Allowance has fallen sharply. It stood at £40,000 for several years before the recent increase to its current level of £60,000 in the chancellor’s spring Budget.

If you want to make a tax-efficient pension contribution in excess of the Annual Allowance, carry forward can help with this. It allows you to make use of any Annual Allowance that you might not have used during the three previous tax years, provided that:

  • Any contributions to your pension must have used all your Annual Allowance in the current tax year.
  • You must have been a member of a UK-registered pension scheme in each of the tax years from which you wish to carry forward (this will normally apply if you had a defined contribution pension pot, a defined benefit pension, or pension credit membership where you have a share of your ex-partner’s pension).

In addition, to receive tax relief on your contributions, you must earn at least the amount you wish to contribute in the tax year you are making the contribution for.

For example, if you have the maximum carry forward available in 2023/24, you would only be able to make a member pension contribution of £180,000 (for the current tax year and three previous years’ unused allowance) if you also had the earnings in the current tax year to support it. This doesn’t apply if your employer is making the contribution on your behalf.

Also, you must use any unused Annual Allowance from the earliest year first. You can only go back three years so, in the 2023/24 tax year, the earliest unused allowance you could use would be from 2020/21.

Finally, the amount of allowance you can carry forward may be affected by either the Tapered Annual Allowance (if you’re a high earner) or the Money Purchase Annual Allowance (if you have flexibly accessed your defined contribution pension). You can read more about this below.

You could benefit from significant tax relief on your savings

The main benefit of using carry forward is that it can increase the amount of tax-efficient pension contributions you can make.

For example, if you are an additional-rate taxpayer, every £1,000 pension contribution only “costs” you £550. So, if you want to boost your retirement fund, maximising contributions by utilising any unused Annual Allowance can help you to make the most of this generous relief.

For example, if you’ve received a significant bonus, enjoyed a good year in your business, or you’ve inherited some money, you may be able to contribute more than £60,000 to your pension without additional tax charges.

2 other pension allowances you need to watch out for

1. Tapered Annual Allowance

The Tapered Annual Allowance reduces the Annual Allowance for high earners, restricting the amount of pension contributions you can make each year before a tax charge is applied.

In 2023/24, the maximum taper applies if you have an “adjusted income” of more than £360,000. In this case, your Annual Allowance will be reduced to £10,000.

If your Annual Allowance has been reduced by application of the taper in previous years, you can only carry forward the balance of the Tapered Annual Allowance to future tax years.

2. Money Purchase Annual Allowance

If you have flexibly accessed your pension savings – for example by taking income under flexi-access drawdown or by receiving an uncrystallised funds pension lump sum – you trigger the Money Purchase Annual Allowance, which restricts your Annual Allowance to £10,000.

Once you trigger this allowance, you lose the option to use carry forward in relation to money purchase contributions made after the trigger date.

However, you can still use carry forward to offset or eliminate the tax charge that arises from money purchase contributions that were made in the same tax year but before the Money Purchase Annual Allowance trigger date.

Get in touch

As you can see, the rules governing carry forward can be complex. So, if you want to make a pension contribution that’s larger than the Annual Allowance you are entitled to, seeking specialist advice can help you to avoid unwanted tax charges.

Find out how we can help you. Email enquiries@blackswanfp.co.uk or contact your adviser on 020 3828 8100.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future results.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.


We aim to keep our clients up to date on interesting and relevant financial news.

You can sign-up to receive our monthly newsletter by email, even if you’re not yet a client. Sign-up using the form below.

Client testimonials

I have always found Black Swan to be caring and understanding of my quirky lifestyle. I always feel they try to get me the best returns while respecting my current needs.

Sally Muir

A client since 2011

We would be very happy to recommend the support and service we receive.

Valerie Locks

A client since 2010

I have always been completely useless regarding finance - thankfully our financial adviser is not! I've retired with far more than I ever expected and investments continue to grow safely. So - thank you!

Bernadette Jane Warner

A client since 2000

Very happy with the professional service I have received and feel a lot happier now with my finances put in order.

Martin Field

A client since 2011

Julie Cooper was recommended to me by a work colleague. She has been very helpful, professional and has explained everything well. I would definitely recommend her services to anyone else who are interested in a financial review.

Steven Rooke

A client since 2018

…Service has been first class.

Hugh Fells

A client since 2012

My face to face meetings with Rob Young and Jessica Lyons have always been very open and understandable. My questions have been answered clearly and I have left feeling that my financial matters are in good hands.

Sandra Jack

A client since 2000

[A] safe pair of hands in a complex financial world.

Gary Middlehurst

A client since 2003

A reliable company with good communication skills and good knowledge of the financial markets.

Alan Evetts

A client since 2014

Maureen Pembridge is a long-time trusted advisor to our family. The market might fluctuate but her attention to detail is consistent.

Linda Burnard

A client since 2000

I am pleased to recommend Julie as a trustworthy financial advisor. She explains financial jargon in plain language, and always listens carefully to my particular financial needs and has helped me make the best of my savings.

Carolann Samuels

A client since 2010

I have always been satisfied with the way that Black Swan has handled my account. And I have always found the staff very helpful whenever I need to call the office.

Robert Anthony Matthews

A client since 2012

An excellent personal service from a person I know and trust.

Michael Dalton

A client since 2010

I am getting a very good services from Black Swan, they have got my investments sorted out which was in a bit of a mess.

Roy Jakens

A client since 2012

A good, efficient team providing clear ideas to shape a winning strategy.

Adrian Michael Levenstein

A client since 2011

Black Swan is a company to be trusted, with friendly staff and professional advisors.

David Brian Jennings

A client since 2017

I have been with Black Swan for many years. I have never wished to change anything. They give a good straight forward service.

Martin Barrett Brooks

A client since 2010

Andy Peters has been invaluable in firstly combining several pension pots and then giving excellent investment advice. It has given us a great deal of comfort to know that our financial affairs are in such good hands.

James Guillum Scott

A client since 2014

I find my financial advisor easy to talk to and feel that she understands my lifestyle. She is always available for help when I need her and explains in words that I can understand.

Margaret Ena Glasgow

A client since 2000

Andy is a first rate Director, excellent communicator and leader.

Ross Perry

A client since

Black Swan Financial Planning and Andrew in particular, are very clever at working out how risk averse we are, and coming up with solutions that we feel comfortable with. We are happy in the knowledge that we can continue to enjoy a comfortable retirement. Andrew Peters is a very, very friendly person who is great to chat to and easy to deal with. He explains things very clearly in layman’s terms, and if we still don’t understand, he explains it until we do!

Alan & Jane Dyer

Clients since 2012

We have always found Rob [Young] to be very approachable and knowledgeable. We have every confidence in the advice given and feel comfortable with the decisions we’ve made. There are certain opportunities that we wouldn’t have known about if Rob hadn’t brought them to light, which makes the advice good value for money as far as we’re concerned.

Peter & Pauline O’Halloran

Clients since 2013

Rob [Young] is extremely knowledgeable. I knew nothing about the different types of trusts which will not only secure my income in retirement, but also leave a legacy for my children. I’m glad that I sought his advice when I did.

Sarah Wilson

A client since 2015

I am extremely happy with the service afforded to me by the company and my adviser Julie Cooper.

Geoff Coxell

A client since 2010

My wife and myself have been dealing with Black Swan for a number of years. We have met with different representatives from the company over the years and have found all very helpful in their own way. We met with James [Anderson] a few years ago and found him very helpful and knowledgeable. He keeps in contact with us on a regular basis. We find the Company information very helpful and we feel very secure with our finances.

Andrew Kirchen

A client since 2015

I have always found my adviser to be easy to contact, very professional in his approach, yet friendly and understanding. I have a sense of an experienced company behind him, really on the ball financially and with good standards.

B McBean

A client since 2011

Partner with the most reliable and experienced team of advisers

Enter your details & we'll be in touch to discuss your needs.
Alternatively, contact us directly and speak to a member of the team.

    Subscribe to our newsletter