Carry forward: our top five frequently asked questions

24 October 2018

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We look at carry forward in the latest in our series of top five FAQs on pensions technical topics.
Carry forward: case studies

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    1. Can an individual use carry forward if they haven’t paid into a pension for a number of years?

      If the individual was a member of a registered pension scheme in the year they want to carry forward from, they’ll be able to use carry forward. The definition of member is very broad and includes an active, deferred, pensioner and pension credit member. 

    2. Can an individual use carry forward after they’ve triggered the money purchase annual allowance (MPAA)?

      It’s not possible to use carry forward to pay contributions to a defined contribution (DC) scheme above the MPAA. When the MPAA has been triggered, contributions to DC scheme are limited to £4,000. Carry forward’s still available for any defined benefit scheme funding.

    3. How do you calculate any unused annual allowance (AA) for tax year 2015/16?

      Tax year 2015/16 is split into two periods. The pre alignment period runs from 6 April 2015 to 8 July 2015 and covers pension input periods which end between the 2 dates. There could be more than one pension input period ending in the pre alignment period. The post alignment period runs from 9 July 2015 to 5 April 2016. The AA for the pre alignment period is £80,000. The AA for the post alignment period is zero, but any unused AA from the pre alignment period can be used in the post alignment period capped at £40,000. Any unused AA from the post alignment period can be carried forward to later years.

    4. Can an individual use carry forward if the tapered AA applies?

      Carry forward can still be used if the taper applies, you would simply substitute the tapered AA for the standard AA in the calculations. The taper was introduced in tax year 2016/17. 

    5. Do you need to inform the pension provider or HMRC if you’re using carry forward?

      No, although it makes sense to keep records in case HMRC query any contributions in the future.

Want to know more?

You can find more information about carry forward below:

 

About the author

Fiona Hanrahan

Senior Product Insight and Technical Support Analyst

Fiona has worked in financial services since leaving university in 1998 and has experience of working in technical support and product design as well as working as a financial planner. She’s a Chartered Financial Planner and a Fellow of the Personal Finance Society.

Last updated: 24 Oct 2018

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