What is the lifetime allowance?

The abolishment of the lifetime allowance on 6 April 2024 is a significant change and will impact you in different ways

The lifetime allowance was how much you can build up in pension savings over your lifetime while still enjoying the full tax benefits.  
Its recent abolishment is a significant change and will impact you in different ways depending on whether you have already taken some or all of your pension savings or whether you plan to take your pension savings in the future.

Key changes – at a glance

The lifetime allowance, and the tax structures that go with it, were abolished on 6 April 2024.

All pensions are now taxed under the current income tax legislation and system, but there will be two new allowances (the Lump Sum Allowance and the Lump Sum and Death Benefit Allowance), which will limit the amount of tax-free lump sums that can be paid from a member’s registered pension schemes.

A new enforcement system has been introduced to implement these new allowances and other pension tax system changes.

The impact on individual members will, in the main, depend on whether they have taken any lump sum benefits before 5 April 2024, or they will take some, or all, of their lump sum benefits after 6 April 2024.

There are transitional arrangements in place so that members who already have a right to a lump sum benefit which exceeds the new allowances will be able to keep their higher entitlements.

A deadline of 5 April 2025 applies for those applying for fixed protection 2016 or individual protection 2016.

To learn more about the  Lump Sum Allowance and the Lump Sum and Death Benefit Allowance, visit our Add more to your pension savings page.


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