Pension lifetime allowance

The pension lifetime allowance (LTA) was the total value that you could save across all of your pension pots without having to pay an extra tax charge.

The LTA was fully abolished on 6 April 2024 and replaced with three different allowances:

  • the lump sum allowance (LSA);
  • the lump sum and death benefit allowance (LSDBA); and
  • the overseas transfer allowance (OTA).

What has replaced the lifetime allowance?

  • The lump sum allowance (LSA) - you can take 25% of your pension as a Pension Commencement Lump Sum (PCLS), also known as ‘tax-free cash’, once you’ve reached age 55 (rising to 57 from 2028). The lump sum allowance is per person, not per scheme so the maximum you can take across all of your pension pots is £268,275.

  • The lump sum and death benefit allowance (LSDBA) - set at £1,073,100, this allowance incorporates both tax-free lump sums an individual takes while alive and lump sums paid on death. If an individual passes away before the age of 75, death benefits are paid tax-free to their beneficiaries - providing they’re paid within two years of the pension provider being notified or ought to have reasonably known of the death. Any death benefits payments made in excess of the £1,073,100 limit will be taxed at the beneficiaries’ marginal rate of income tax. Find out how you can set up your beneficiaries in your BeeHive.

  • The overseas transfer allowance (OTA) - set at £1,073,100, this is a separate allowance which is reduced by any transfer payments made to a qualifying recognised overseas pension scheme (QROPS).

These allowances may be higher if the individual has LTA protection - a safeguard HMRC put in place to protect pension savings from previous reductions in the LTA. They’re usually for those who had already built up sizable pensions (or expected to).

What is lifetime allowance protection?

If you built up a sizeable pension pot before 6 April 2006 and registered for enhanced and/or primary protection with HMRC then this may mean you have a higher LSA or LSDBA. There are a further two LTA protections that are currently available to eligible savers.

  • Individual protection 2016 - if your pension(s) were worth more than £1 million on 5 April 2016, you can apply for individual protection 2016. This keeps your LTA at either £1.25 million or the value of your pension(s) on 5 April 2016 (whichever amount is lower). You can continue paying into your pension(s) but after you retire, you must pay tax on any withdrawals that exceed your protected LTA.
  • Fixed protection 2016 - this fixes your LTA at £1.25 million, but you can no longer contribute to your pension without losing the protection.

The deadline for submitting applications for either of these protections is 5 April 2025.

The history of the lifetime allowance

Since it was first introduced at a generous £1.5 million in 2006, the LTA underwent many changes before it was eventually abolished in April 2024.

Tax year LTA amount
2023-24 £1,073,100
2022-23 £1,073,100
2021-22 £1,073,100
2020-21 £1,073,100
2019-20 £1,055,000
2018-19 £1,030,000
2017-18 £1,000,000
2016-17 £1,000,000
2015-16 £1,250,000
2014-15 £1,250,000
2013-14 £1,500,000
2012-13 £1,500,000
2010-12 £1,800,000
2006-10 £1,500,000

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.

Last edited: 06-04-2024

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