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.
The salary-sacrifice version. Some workplace AVCs are taken by salary sacrifice — you give up gross pay, so you save income tax and National Insurance, and there's nothing to reclaim. That can make the effective cost of £100 even lower than the table above.
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.
See how a top-up grows over time
Use the compound interest calculator to project what regular AVCs could be worth by retirement at different return rates.
Try the Compound Interest Calculator →Frequently asked questions
What is an AVC pension?
An Additional Voluntary Contribution (AVC) is extra money you pay into a pension on top of your normal contributions, to boost your retirement pot. AVCs are a defined-contribution arrangement and get tax relief at your marginal rate, like any pension contribution.
How much can I pay into AVCs?
You get tax relief on pension contributions up to the annual allowance — £60,000 for 2026/27 — or 100% of your earnings, whichever is lower. This covers your contributions plus any employer contributions. You can carry forward unused allowance from the previous three tax years if you have it.
How much does an AVC actually cost me?
Because of tax relief, £100 in your pension costs a basic-rate taxpayer £80, a higher-rate taxpayer £60, and an additional-rate taxpayer £55 (after reclaiming the extra relief). Relief at 20% is usually added automatically; higher and additional-rate relief is claimed through Self Assessment.
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).
Cite this article
Randive, A. (2026). UK AVC Pension Top-Ups 2026/27: Cost and Tax Relief. DecisionsCalc. https://decisionscalc.com/articles/uk-avc-pension-top-up/