​​​​Pension lump sum allowances (previously Lifetime Allowance)

The Lifetime Allowance (LTA) used to be a limit on the total value of pension benefits you could build up across all registered pension arrangements without triggering a tax charge.

  • The LTA charge was removed from 6 April 2023.
  • The LTA was abolished from 6 April 2024 and replaced with a system focused on tax-free lump sums.

From 6 April 2024, there is no longer an overall “lifetime limit” on the total value of pension savings. Instead, the tax rules limit how much can be paid tax-free as certain lump sums.

​​The allowances that apply from 6 April 2024

Lump Sum Allowance (LSA)

This is the limit on the total amount of certain tax-free retirement lump sums you can take in your lifetime. 

Standard LSA: £268,275

If you exceed your available LSA, the excess part of the lump sum is usually subject to income tax.

Lump Sum and Death Benefit Allowance (LSDBA)

The table below provides examples of when an LTA breach could occur.

Standard LSDBA: £1,073,100

If you exceed your available LSDBA when a relevant lump sum is paid, the excess is generally taxable at the recipient’s marginal rate of income tax.

Why you may still see “Lifetime Allowance (LTA)” wording

Even though the LTA is abolished, it may still appear on:

  • Historic benefit statements and older retirement paperwork
  • Cases where benefits were taken or paid before 6 April 2024
  • Records used to work out how much of your new allowances may already have been used up (transitional rules)

How LTA was calculated (for historic statements and benefits before 6 April 2024)

Some older statements show an LTA “value” and percentage. In a defined benefit scheme, the LTA value was commonly calculated as:

Step 1: Multiply the annual pension by 20

Step 2: Add any lump sum entitlement

Step 3: Convert the total into a percentage of the (then) standard LTA

Example (historic illustration using the former standard LTA of £1,073,100):

  • Pension: £60,000 a year
  • Lump sum: £250,000

LTA value = (20 × £60,000) + £250,000

= £1,200,000 + £250,000

= £1,450,000

LTA percentage = (£1,450,000 ÷ £1,073,100) × 100

= 135.12%

When tax could apply (now)

Since 6 April 2024, tax is generally only triggered where certain lump sums exceed the available LSA or LSDBA.

If you have benefits in other pension arrangements, that can affect how much allowance remains available to you.

Further support

If you are a Civil Service employer, specialist pension tax/allowances training is available.

Employer LTA Support