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The meaning of words which appear in bold underlined text are explained in the glossary. You can click on each term to see the definition.

The lifetime allowance (LTA) was an overall limit on the value of your pension benefits from all registered pension schemes before a tax charge would apply. This was known as the ‘lifetime allowance charge’. The LTA is currently £1,073,100.

The lifetime allowance charge was removed with effect from 6 April 2023. However, the LTA could still affect the maximum one-off lump sum you can receive free of income tax when you take benefits. Lump sums taken in the 2023/2024 tax year that would previously have been subject to the lifetime allowance charge are instead taxed as income.

The LTA will be abolished from 6 April 2024, with transitional arrangements in place for benefits taken before 6 April 2024. 

We have provided further details below. However, these changes were announced by the government in the 2023 Spring Budget and have only recently been introduced into law.  We are expecting further guidance from HM Revenue & Customs (HMRC) on the operation of these new rules and we will update this page as we know more.

The new regime

From 6 April 2004 the LTA is being replaced with a new regime with two new allowances:

Fixed and individual protection

If you have one of the existing LTA protections, your lump sum allowance and lump sum and death benefit allowance will be increased. Broadly, the effect will be to maintain the entitlement you had prior to the abolition of the LTA based on your level of protection.

It is not too late to apply for fixed protection 2016 or individual protection 2016. The deadline for applications is 5 April 2025. If you think you may be affected by the LTA or the new allowances and are interested in applying for protection, please click on the following link for more information.

Protect your lifetime allowance

How the above changes to pensions tax may affect you

Please click on the scenario that applies to you.

1. If you have not taken your benefits yet (March 2024)
  • If you take your pension benefits before 6 April 2024 your benefits will be tested against the current LTA, but no lifetime allowance charge will be applied. Any excess will be taxed at your marginal income tax rate.
  • If you take your benefits on or after 6 April 2024 and opt to take a lump sum, this will be assessed against the lump sum allowance. You will also need to declare any lump sums that you have taken from other pension arrangements.
  • If you opt to take a lump sum, we will test against your available lump sum allowance and confirm how much it has used.
2. If your benefits are already in payment (March 2024)
  • The changes explained above will not affect your benefits already in payment, which will continue to be subject to UK tax at your marginal income tax rate for the tax year. 
  • From 6 April 2024, if you have any pensions not yet in payment from another pensions arrangement, you will need to let these pensions arrangements know of any tax-free lump sums you have already taken (including any from Rothesay) when you take your benefits.
  • If you have taken lump sums close to the limit and have further benefits that may take you over then you may want to consider applying for Fixed Protection 2016 or Individual Protection 2016, as explained above.