Case study - maximising pension contributions

Last updated 6 April 2026

Mia became a member of her employer’s defined benefit (DB) scheme when she joined the company several years ago. At the end of 2023/24 tax year, they stopped ongoing accrual in the scheme and switched everyone into a DC scheme - a group personal pension. The company pays in 10% of earnings and employees pay 5%. Mia’s earnings for the 2026/27 tax year will be £78,000.

She recently inherited £100,000 and is interested in paying some or all of it into her pension.

So how much of it can she can she pay in?

2026/27 tax year - what information is needed?

Mia’s earnings? £78,000

Contributions paid this tax year (including the expected regular contributions up to 5 April 2027):

5% employee	10% employer	Total
£3,900	£7,800	£11,700

Any contributions to other schemes? No, Mia only has her workplace scheme.

Are her earnings large enough to bring the tapered annual allowance* into play? No.

Has the money purchase annual allowance (MPAA)* been triggered? No.

* Details on the tapered annual allowance and the MPAA can be found in our 'Annual Allowance' guide.

Scope for the current tax year

As neither the tapered annual allowance or MPAA affect Mia, she has the standard £60,000 annual allowance available.

The total expected contributions this year will be £11,700, so the remaining annual allowance for 2026/27 is £48,300 (£60,000 - £11,700).

Mia could pay a single contribution of £48,300 gross (£38,640 net) to use the full £60,000 allowance for the current tax year.

Tax relief on Mia’s own contributions is limited to her relevant UK earnings in the tax year. If she pays the additional £48,300, she would have personally paid £52,200 (the £3,900 regular contribution and a single of £48,300) from her relevant earnings of £78,000.

If Mia paid more than £52,200, she would still be able to claim tax relief up her total earnings of £78,000 but, if no unused allowance is available through carry forward to boost this year’s annual allowance, she would be subject to the annual allowance tax charge on the amount over the £60,000 allowance, which would effectively take away some of the tax relief claimed.

So Mia needs to check if she has any unused annual allowances from the previous three years which she can carry forward to justify a larger contribution in this year.

Carrying forward unused annual allowance from previous three years

The carry forward years - what information is needed?

Total contributions/input amounts for each of the previous three tax years.

For the GPP, this is just the regular contributions - no additional payments were made.

Tax year	Earnings	5% e'ee	10% e'er	Total
2024/25	£68,000	£3,400	£6,800	£10,200
2025/26	£72,800	£3,640	£7,280	£10,920

For 2023/24, the input amount for the DB scheme is essentially the increase in the amount of pension accrued in that tax year, multiplied by 16 to give a capital value*. Generally, a statement from the pension scheme will be needed to confirm the input amount from a DB scheme. Mia’s statement for the 2023/24 tax year shows an input amount of £17,200.

Any contributions to other schemes? No.

Were her earnings large enough to bring the tapered annual allowance into play? No.

* More detail on working out input amount for DB schemes can be found in our ‘Annual allowance’ guide.

Calculating the unused allowances available for carry forward

Pulling together all of the information, the unused allowances for the three previous tax year are:

Tax year	Annual allowance	DB input amount	DC input amount	Unused allowance
2023/24	£60,000	£17,200	£0	£42,800
2024/25	£60,000	£0	£10,200	£49,800
2025/26	£60,000	£0	£10,920	£49,080

There is a total of £141,680 in unused allowances (i.e. £42,800 + £49,800 + £49,080).

So, in addition to the £48,300 payment to fill up this year’s annual allowance, Mia could pay a further £141,680 without exceeding her available allowances.

However, the maximum tax relievable personal contribution is equal to 100% of Mia’s earnings - and £52,200 of this will already be used up in respect of 2026/27.

To maximum fund this year personally, Mia’s total contributions could be:

£3,900 - this is her 5% regular contributions to the DC scheme
A further £48,300 - to use up the 2026/27 annual allowance (taking account of the £7,800 employer contributions)
An additional £25,800 to fund up to Mia’s 100% of earnings, using carry forward
Mia’s total personal contributions in 2026/27 would therefore be £78,000

So, in tax year 2026/27 she can make a gross single contribution of £74,100 (£48,300 + £25,800) from her inheritance.

However, she would only actually pay a net contribution of £59,280, to which the provider would add the basic rate relief, grossing it up to £74,100. She could claim some higher rate relief on this payment (but only to the extent that she paid higher rate tax).

When carrying forward, the earliest tax year is used first. The required amount of unused allowance (£25,800) can all be carried forward from 2023/24, leaving all of the unused allowance from 2024/25 (£49,800) and 2025/26 (£49,080) untouched. These amounts will be available next year if Mia is in a position to make another large contribution that requires carry forward.

Using the remainder of the inheritance

Mia wasn’t in a position pay all of the inheritance into her pension in tax year 2026/27, because she didn’t have the earnings to support the full payment.

Having made a net payment of £59,280 in 2026/27 to achieve the gross contribution of £74,100, she still has £40,720 of the inheritance left.

If Mia’s earnings in 2027/28 remain the same or see a typical increase, she would have more than sufficient relevant UK earnings to support both the net contribution of £40,720 being grossed up to £50,900 and her regular 5% contributions.

She would still have £98,880 of unused allowance available from 2024/25 and 2025/26, in addition to any remaining 2027/28 annual allowance after regular contributions are taken into account. So, she would have enough available annual allowance to cover both the regular contributions and the remainder of her inheritance.