Pension Lifetime Allowance (LTA)
Published / Last Updated on 26/06/2023
Pension Lifetime Allowance (LTA) was the maximum amount you could build up in pension funds (or equivalent) during your lifetime before you started to get additional tax penalties for exceeding the LTA.
Currently for tax year 06/04/2024 to 05/04/2025 the LTA stands at £1,073,100.00 but there are no longer any tax penalties for exceeding this limit (Spring Budget 2023) so, it technically no longer exists.
- See: AA & LTA
In April 2024, the LTA will be completely removed/abolished but this may be reversed with a change of government after any general election.
History of LTAs:
| Tax year | Amount |
|---|---|
| 2023 to 2024 | £1,073,100 (disappears in April 2024) |
| 2022 to 2023 | £1,073,100 |
| 2021 to 2022 | £1,073,100 |
| 2020 to 2021 | £1,073,100 |
| 2019 to 2020 | £1,055,000 |
| 2018 to 2019 | £1,030,000 |
| 2017 to 2018 | £1,000,000 |
| 2016 to 2017 | £1,000,000 |
| 2015 to 2016 | £1,250,000 |
| 2014 to 2015 | £1,250,000 |
| 2013 to 2014 | £1,500,000 |
| 2012 to 2013 | £1,500,000 |
| 2011 to 2012 | £1,800,000 |
| 2010 to 2011 | £1,800,000 |
| 2009 to 2010 | £1,750,000 |
| 2008 to 2009 | £1,650,000 |
| 2007 to 2008 | £1,600,000 |
| 2006 to 2007 | £1,500,000 |
There have also been significant changes over the years to the Pension Annual Allowance.
What if I have more than this already?
There are still transitional protection schemes in place to allow you to retain what you have invested and still be able to contribute to pension schemes.
How do you value a pension scheme that has no “value” e.g. a Final Salary Pension Scheme?
Lifetime Allowance and Maximum Tax Free Cash
1. Maximum Tax Free Cash
The maximum tax free cash available at retirement will be the lower of
- 25% of your pension fund value at retirement date or
- 25% of the Lifetime Allowance in the year that you “retire” and now capped at £268,275 from April 2023 unless you have older/transitional protection.
See TFC PCLS Cap
What if I am already entitled to more tax free cash at retirement than this?
There are transitional protection schemes in place that allowed you to register with HMRC and protect your tax free cash entitlement.
2. If your combined pension fund values exceed the lifetime allowance these will be no longer be subject to a tax charge from April 2023.
Previously, exceeding the Lifetime Allowance would mean that you have tax penalties unless you have protected them.
3. Excess Pension Lump Sums
You are still able to withdraw 25% of the pension fund as a tax free cash lump sum up to the old LTA cap but if you have excess funds (above the new Lifetime Allowance Lump Sum Cap £268,275 from April 2023) they are taxed at 55%.
Excess Pension Fund For Income
You are able to use the excess funds over LTA to provide you with a pension income rather than lump sum without any additional tax charge.
What if I was already exceeding those figures before the 2006 changes?
There were transitional protection schemes in place to allow you to register and protect the entitlement you have accrued before the rules started on 5 April 2006.
3. If you receive a share of the ex-spouses pension:
For Pension Credits that are allocated to you as part of a divorce settlement and Pension Sharing Order i.e. if you receive a share of your ex-spouses pension, this will now count towards your Lifetime Allowance.
If you have to give a share of your pension to your ex-spouses:
For Pension Debits that are allocated to your spouse and taken from you and your pension as part of a divorce settlement and Pension Sharing Order i.e. if you lose a share of your pension and give it to your, this will now not count towards your Lifetime Allowance.