Lifetime Allowance (LTA) abolished

The LTA was the lifetime limit on the amount of pension saving that an individual could make without triggering additional taxation penalties.

The government set in motion a plan to abolish it in April 2024, so now it has gone. What are the key consequences of that?

1. No limit on the amount of pension savings over a lifetime for individuals. Previously this was set to £1,073,100 but now individuals can save more in their pension over their lifetime without penalty. The amount that can be withdrawn tax-free has been fixed at £268,275 though. All withdrawals on top of the tax-free amount are charged at the individual’s marginal rate of tax.
2. The annual allowance of £60,000 (AA) and the money purchase annual allowance (MPAA) of £10,000 still apply.
3. Now, a lump sum and death benefit allowance (LSDBA) applies when passing pension savings to beneficiaries or when an individual is in receipt of a serious ill health lump sum. This limits the amount of authorised lump sums and death benefit lump sums payable to an individual to £1,073,100 (subject to any individual protections).
4. Overseas transfer allowance capped at £1,073,100.

It’s worth adding that these allowances may be higher if an individual has historic lifetime allowance protection or specific arrangements were in place for particular schemes. In such circumstances it may be necessary to apply for a Transitional Tax Free Amount Certificate (TTFAC) before you access any further benefits.

There’s (much) more on Money Helper’s handy guide or you can speak to a Wren Sterling Financial Planner for more information and personalised advice.

The value of your investments (and any income from them) can down as well as up which would have an impact on the level of pension benefits available.  Your pension income could also be affected by the interest rates at the time you take your benefits.

The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change. You should seek advice to understand your options at retirement.