Fresh figures from HM Revenue & Customs (HMRC) reveal a sharp jump in the number of pension savers falling foul of the annual allowance, with 30,440 individuals reporting that they had exceeded their personalised limit in the 2024/25 tax year through self-assessment.
That marks a 22 per cent rise from the 24,950 who breached the threshold in 2023/24. The total value of contributions above the allowance also climbed steeply, reaching £672million in 2024/25 compared with £505million the year before, an increase of 33 per cent.
David Little, partner in Financial Planning at wealth management firm Evelyn Partners, described the rises as “quite striking,” noting that the full annual allowance currently stands at £60,000 and was set at that level in both tax years covered by the data.
The surge is particularly puzzling given that the allowance was lifted from £40,000 to £60,000 by then Chancellor Jeremy Hunt in April 2023, following his Spring Budget.
HMRC is raking out from pension contributions exceeding the tax-free allowance
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That increase ought to have given savers considerably more room for large annual contributions than they had enjoyed in nearly a decade, which might reasonably have been expected to drive breach numbers down.
He pointed to a period of elevated inflation during which higher earners could readily have lost sight of how rising salaries and bonuses affected their pension position.
Defined benefit scheme members face a particular challenge, he added, because the way their pension is measured against the allowance makes it harder to track.
Generous public sector pay settlements during this period may also have played a part.
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Since both years under comparison shared the same £60,000 standard allowance, some savers may simply have exceeded the full limit by mistake as their earnings grew or after directing large bonuses into their pension.
Higher employer contributions and unexpectedly strong pension growth within defined benefit schemes can also trigger breaches.
Yet the taper remains an especially dangerous pitfall because the headline £60,000 figure can lull higher earners into a false sense of security.
Mr Little explained: “Where threshold income exceeds £200,000 and adjusted income exceeds £260,000, the allowance is reduced by £1 for every £2 of additional adjusted income, potentially falling to just £10,000.”
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Crucially, adjusted income encompasses employer pension funding, meaning individuals can be caught even when their own contributions appear modest.
Variable earnings, year-end bonuses and contributions spread across multiple schemes make the final calculation extremely difficult to predict until late in the tax year.
Compounding the problem, HMRC does not track these breaches as they happen but instead depends on individuals to self-report, meaning some savers only discover they have been over-contributing two or three years after the fact, and then face a substantial retrospective tax charge.
He urged savers to request current pension input figures from every scheme, calculate their total income including bonuses and benefits, and establish whether any unused allowance from the preceding three tax years can be carried forward.