HM Revenue & Customs (HMRC) has issued updated guidance on pension contribution rules following an inquiry from a taxpayer approaching retirement. The individual, who plans to retire from full-time work at the end of April 2026, sought clarity on how much they could contribute to their private pension for the 2026/2027 tax year.
Key Points from HMRC's Response
The taxpayer asked whether contributions could be based on annual earnings and if unused allowances from previous years could be utilized. HMRC explained that for the 2026/27 tax year, the individual would have roughly one month of earnings. They stated: "You can personally contribute up to 100 per cent of your relevant UK earnings for the 2026/27 tax year."
Annual Allowance Limit
HMRC further clarified that contributions are capped at the standard annual allowance, which is £60,000 for the 2026/27 tax year. Under current rules, you can contribute up to £60,000 into your private pensions without incurring a tax charge each financial year. However, this allowance is reduced if your threshold income exceeds £200,000 or your adjusted income is more than £260,000. Detailed information on how the tapered allowance works is available on the government website.
State Pension Considerations
When planning retirement finances, it is essential to check your projected state pension. You can find this information on the gov.uk website. Generally, you need 35 years of National Insurance contributions to qualify for the full new state pension, which currently pays £241.30 per week (approximately £12,550 annually).
Martin Lewis's Advice
Financial expert Martin Lewis recently offered insights on whether it is worthwhile to pay to fill gaps in your National Insurance record. The state pension age is gradually increasing from 66 to 67 between April 2026 and April 2028, with legislation in place for a further rise from 67 to 68 between April 2044 and April 2046.
