Pension Lifetime Allowance

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  • Background

The Lifetime Allowance (LTA) is a limit on the pension savings you can build up without a charge being applied when you take your benefits.

The limit was introduced as part of the ‘A-Day’ reforms that were brought in on 6th April 2006. It started at £1,500,000 in 2006/07, rose to £1,800,000 in 2011/12 and then steadily reduced to £1,000,000 by 2016/17. It currently stands at £1,073,100 and will remain at this level until at least the 5th April 2025. Any excess will be subject to a lifetime allowance charge and taxed at 55% if taken as a lump sum or 25% if taken as income which will then be subject to income tax. Calculating the value of your benefits for lifetime allowance purposes and when it might be exceeded can be complex. Decisions you make now can have a big impact on your retirement income and lifestyle so it’s important to get the right advice.

The tax take from the lifetime allowance charge, recently published by HMRC, was up six per cent from £269m in 2017 to 2018. This represents the single biggest amount clawed back in one year since the introduction of the allowance in 2006.

This has forced large numbers of pension savers to pay taxes they weren’t aware they would have to pay and disincentivised people from making further contributions, missing out on valuable tax reliefs in the process and undermining confidence in the pension system.

  • Options to mitigate
    your charge

There are a number of options available to protect pension savers and potentially mitigate their liability to a future Lifetime Allowance charge.

Your individual circumstances and position will determine which options are most appropriate but we will work with you to ensure you minimise the impact of any potential charges while continuing to benefit from the valuable tax reliefs your pensions can offer.


Free 3o minute review

Please get in touch to book a free 30 minute review with an expert in this area.