Gov Fixes the Lifetime Allowance Abolition Errors

The Lifetime Allowance (LTA), the maximum you could build up in pension benefits throughout your lifetime was abolished by the previous government (budget 2023) but there was a series of errors and omissions in the legislation that have finally been fixed with effect from 18 November 2024.

All the omissions and errors were connected with the maximum pension lump sums people could take depending upon your pension position as follows:

• Protected tax cash amounts (higher than 25%) built up before ‘A’ Day when LTA was introduced on 06/04/2006. 
• Pension transfers when ‘enhanced protection’ was in place. Enhanced Protection allowed people with tax free cash entitlement above £375,000 as at 05/04/2006 to apply to HMRC to protect the higher amount (25% of the new Lifetime Allowance of £1.8m at the time was £375,000)
• Payments of a lump sum death benefits from funds which crystallised (some benefits e.g. lump sums taken) before 6 April 2024.
• Pension transfers from UK drawdown schemes (both capped and flexible drawdown already in payment) to a qualifying recognised overseas pension scheme (QROPS).
• Pension transfers to QROPS for benefits accrued before 6 April 2006.

Comment

HMRC advised those affected to do nothing until these fixes were put in place and now they are, so if you were affected by any of the above and wanted to transfer or have death benefits paid out, you are now free to do so.

It is helpful that HMRC has now fixed the above errors/omissions.  These would have been done whether Labour or Conservatives were in power so neither deserve any credit.