Annual Allowance and SIPP Property: Contribution Limits Explained

The annual allowance is the maximum amount that can be contributed to all your pension schemes in a given tax year without triggering an annual allowance charge. For 2024/25, the annual allowance is £60,000. This covers all contributions — both your own personal contributions and any employer contributions made on your behalf. If total contributions across all your schemes exceed this limit, you pay income tax on the excess at your marginal rate.

The annual allowance is a per-individual limit, not a per-scheme limit. If you have a SIPP and a SSAS, the £60,000 limit applies across both schemes combined. This is particularly important for company directors who might be making both employer contributions (via the company) and personal contributions (from their own salary) simultaneously.

The annual allowance applies equally to SIPP and SSAS schemes. For SSAS schemes with multiple members, the £60,000 limit applies to each member separately — which is one of the reasons multi-member SSAS schemes can build large funds relatively quickly.

If you have not fully used your annual allowance in any of the three previous tax years, you can carry forward the unused amount and add it to the current year's allowance. In theory, this could allow contributions of up to £240,000 in a single year (four years' worth of full allowances) — though in practice, the amount you can contribute is also limited to your relevant UK earnings for the year (for personal contributions).

Carry forward is particularly valuable for SIPP property investors who are building toward a specific purchase target. By carrying forward unused allowances in a high-income year and making a large single contribution, you can accelerate the growth of the fund significantly and bring forward the date at which a target property becomes accessible.

To use carry forward, you must have been a member of a registered pension scheme in each of the years from which you are carrying forward (not necessarily contributing — simply being a member is sufficient). You also need to use the current year's allowance in full before dipping into carry-forward years. The calculation can be complex when employer contributions are involved, so it is worth working through the numbers carefully with your accountant or pension adviser before making a large contribution on the basis of assumed carry-forward capacity.

Once you have drawn flexible benefits from a money purchase pension — for example, taken income drawdown, or a flexible annuity — you trigger the Money Purchase Annual Allowance (MPAA). The MPAA is £10,000 per year (2024/25), and it applies to all future money purchase contributions. You cannot carry forward to exceed it.

For SIPP property investors, the MPAA is a critical risk to understand. If you access your SIPP early — taking a cash lump sum or setting up drawdown before you have finished contributing — you may permanently restrict your ability to make further contributions to only £10,000 per year. This could derail a SIPP property strategy that was counting on continued high contributions to fund a future purchase.

Before accessing any pension benefits, take advice from a specialist to understand whether doing so will trigger the MPAA and what the impact would be on your future contribution capacity and property investment plans. In most cases, it is better to delay any benefit crystallisation until you are confident you no longer need to make substantial contributions.

If you have a specific property in mind and know the fund size you need to access it (accounting for the 50% LTV mortgage capacity), you can work backwards to establish the contribution schedule required. For example, if the target property will cost £600,000 and the SIPP will need at least £400,000 in net assets to support a 50% LTV mortgage, and your SIPP currently has £200,000, you need to contribute at least £200,000 more — at a maximum of £60,000 per year, that is at minimum a three-to-four year plan.

Using carry forward in year one can accelerate this significantly, potentially enabling a large initial contribution that gets the fund close to target faster. Working with a specialist pension adviser who understands both the contribution rules and the property financing requirements is essential to make this planning work effectively. Contact our team, or read about corporation tax relief on contributions to understand how to fund the contributions tax-efficiently in the first place.