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Additional State Pension

This applies to you if you reached State Pension age on or before 5 April 2016.

In addition to the basic State Pension you may have also built up an additional State Pension. Like the basic State Pension this is also based on your National Insurance contributions, but also takes into account your earnings and whether you claimed benefits. 

You will not have built up an additional State Pension while a member of a contracted-out pension arrangement.

Basic State Pension

This applies to you if you reached State Pension age on or before 5 April 2016.

The full basic State Pension for 2023/24 is £156.20 per week and for 2024/25 is £169.50 for people who have all the qualifying years of National Insurance contributions. If you do not have all the qualifying years of National Insurance contributions, you will be paid a proportion of the full amount based on the number of years of National Insurance contributions that you do have. 

Consumer Prices Index (CPI)

The CPI is an inflation measure based on the change in the prices of a representative basket of goods and services over time.

Fixed protection 2016

This fixes your lifetime allowance at £1.25 million.

If HMRC received your application on or after 15 March 2023, you cannot keep building up your pensions from 6 April 2016, except in limited circumstances. It does remain possible to make a claim for Fixed Protection 2016 until 5 April 2025, providing no further contributions have been made into your pension from 6 April 2016.

If HMRC received your successful application before 15 March 2023 and you still validly hold this protection, you can continue to build up your pensions without impacting the validity of your Fixed Protection 2016 from 6 April 2023. The rules on how you can lose your protection still apply from 6 April 2016 to 5 April 2023.

Individual protection 2016

Protects your lifetime allowance to the lower of:

  • The value of your pension savings at 5 April 2016
  • £1.25 million

You can continue building up your pension savings but you must pay a tax charge on money taken from your pension savings that exceed your protected lifetime allowance if you take your pension before 6 April 2023.

It remains possible to make a claim for Individual Protection 2016 until 5 April 2025.

Lifetime allowance (LTA)

The LTA used to be the overall limit on the value of your pension benefits from all sources (except the State Pension and any benefits you are receiving as a dependant) before a tax charge was applied.  The LTA will be abolished from 6 April 2024.

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Lifetime allowance charge

The lifetime allowance was an overall limit on the value of your pension benefits from all registered pension schemes – and any overseas pension schemes that have benefitted from UK tax relief – before a 55% tax charge would apply, if taken as a lump sum (or 25% on the purchase of a lifetime annuity where annuity income was subject to tax). This was known as the ‘lifetime allowance charge’. The lifetime allowance charge was removed with effect from 6 April 2023. Lump sums that would previously have had a 55% tax charge applied are instead taxed as pension income of the recipient in 2023/24.

Lifetime allowance event

An event before 6 April 2024 defined by HMRC as a “benefit crystallisation event,” that required your benefits to be tested against the lifetime allowance.

Lifetime allowance (LTA) protection

When the LTA was introduced and later when changes were made, individuals were given the opportunity to apply for protection against the LTA so that they would reduce or eliminate the effect of the lifetime allowance charge when they take their benefits.

There are four types of protection against the LTA: Primary Protection, Enhanced Protection, Fixed Protection (2012, 2014 and 2016), and Individual Protection (2014 and 2016). If you have applied for any protection, please ensure that we are made aware of this as it may affect your benefits.

Lifetime annuity

An insurance policy which provides you with a guaranteed income for the rest of your life.

Lump sum

A single payment made at a particular time, rather than a series of smaller payments.

Lump sum allowance (LSA)

With effect from 6 April 2024, the LSA will be set at £268,275 as a standard (25% of the 2023/2024 LTA) and restricts the amount of lump sum that can be received tax-free when you first take your pension benefits.

Lump sum and death benefit allowance (LSDBA)

With effect from 6 April 2024, the LSDBA will be set at £1,073,100 as a standard (the 2023/24 LTA). It will apply to the tax-free element of all lump sum benefits received from pension arrangements. Each time you become entitled to one of these lump sums (or a person is paid one of these lump sum benefits in the event of your death), this allowance is reduced.

Marginal income tax rate

The rate of tax on the next £1 of income. In the UK as elsewhere, the more you earn, the more tax you pay.

New State Pension

The new State Pension is a regular payment from the government that most people can claim in later life. You can claim the new State Pension when you reach State Pension age if you have at least 10 years of National Insurance contributions and are:

  • A man born on or after 6 April 1951
  • A woman born on or after 6 April 1953

The new State Pension for 2023/24 is £203.85 per week and for 2024/25 is £221.20.

Overseas transfer allowance (OTA)

The OTA is currently set at £1,073,100 and is the amount that can be transferred to a QROPS without incurring a tax charge provided specific conditions are met.

Pension benefits

The sums of money you get from your pension arrangements plus any sums of money your dependants receive on your death.

Pension commencement lump sum (PCLS)

The amount of lump sum that can be paid tax-free to a policyholder when they take certain pension benefits.

Personal allowance

Your personal allowance is the amount of income you do not have to pay tax on. The standard personal allowance is £12,570 for the 2023/24 and 2024/25 tax years.

Your personal allowance may be bigger if your spouse or civil partner claimed marriage allowance or you are entitled to blind person’s allowance. It is smaller if your income is over £100,000 or if you claimed marriage allowance in favour of your spouse or civil partner.

Qualifying recognised overseas pension scheme (QROPS)

A pension scheme established outside the UK that is broadly similar to a UK registered pension scheme. The scheme would have confirmed to HMRC that it meets the conditions that the HMRC has set out and undertakes to provide information to HMRC.

Registered pension scheme

A registered pension scheme is a pension scheme that is registered under Chapter 2 of Part 4 of the Finance Act 2004 because either:

  • An application to be registered has been made and the scheme has been registered by HMRC

  • The scheme is treated as automatically registered

The main benefit of a pension scheme being registered is the availability of certain tax reliefs and exemptions.

Your Rothesay policy is regarded as a registered pension scheme.

Tax year

The tax year runs from 6 April in one year to 5 April in the following year. For example the 2024/25 tax year is the period 6 April 2024 to 5 April 2025.

Transitional tax-free amount certificate (TTFAC)

A document issued to an individual confirming the individual’s revised lump sum allowance (LSA) and lump sum and death benefit allowance (LSDBA). A TTFAC can only be issued before certain lump sum benefits are taken post 6 April 2024.