Retirement · UK

UK AVC Pension Top-Ups (2026/27): What They Cost & the Tax Relief

An Additional Voluntary Contribution (AVC) is simply extra money you put into a pension on top of your normal contributions. Because pension contributions get tax relief at your marginal rate, an AVC is one of the most tax-efficient ways to boost your retirement pot — £100 inside your pension can cost you as little as £55. Here's how the maths works and how much you can put in.

What an AVC actually costs you

The headline: tax relief means the government tops up what you pay, so the real cost of each £100 in your pension depends on your tax band:

Your tax band	£100 in your pension costs you	Effective "discount"
Basic rate (20%)	£80	20%
Higher rate (40%)	£60	40%
Additional rate (45%)	£55	45%

With relief at source, you pay £80 and the provider reclaims the basic-rate £20 for you automatically — so £80 becomes £100 in the pot straight away. Higher and additional-rate taxpayers then claim the extra 20–25% back through their Self Assessment tax return (or by asking HMRC to adjust their tax code), bringing the net cost down to £60 or £55. Many higher-rate taxpayers never claim this — it's one of the most-missed reliefs in UK personal finance.

How much you can pay in

You get tax relief on pension contributions up to the annual allowance, which is £60,000 for 2026/27, or 100% of your earnings if that's lower. Important points:

• The £60,000 covers everything going in — your contributions, your AVCs, and your employer's contributions.
• You can carry forward unused allowance from the previous three tax years, if you were a pension member then — useful for a one-off large top-up (e.g. a bonus).
• If you earn over £200,000, a tapered allowance may apply, reducing it to as little as £10,000.
• If you've already flexibly accessed a defined-contribution pension, the Money Purchase Annual Allowance (MPAA) caps further contributions at £10,000 a year.

When topping up is worth it

• You're a higher or additional-rate taxpayer. Getting 40–45% relief is the strongest case — especially if you're not already claiming it.
• You're near a tax cliff. Contributions reduce your adjusted net income, which can restore the personal allowance (lost between £100k–£125,140) or child benefit — sometimes giving effective relief well above 45%.
• Your employer matches AVCs. Always capture a match first — it's free money on top of the tax relief.
• You won't need the money before pension age (currently 55, rising to 57 in 2028). Pensions are locked until then — see bridging to pension access age.

Frequently asked questions

What is an AVC?
Extra, voluntary money paid into a pension on top of your normal contributions, with tax relief at your marginal rate.

How much can I pay in?
Up to the £60,000 annual allowance (2026/27) or 100% of earnings, including employer contributions; carry forward up to three years.

What does £100 in my pension cost?
£80 at basic rate, £60 at higher rate, £55 at additional rate (after reclaiming the extra relief).

Related

• UK State Pension: how much you'll get
• Bridging to pension access age
• ISAs vs pensions: which wrapper first · Compound interest calculator

Sources

• GOV.UK — Tax on your private pension contributions (annual allowance, relief at source)
• House of Commons Library — Pension tax relief: the annual allowance
• MoneyHelper — Annual allowance, tapered allowance and the MPAA (2026/27)

Figures for 2026/27. Tax treatment depends on your circumstances and can change. Verify on GOV.UK and consider regulated advice for large or complex contributions. General information, not regulated financial advice (FCA).