Lifetime Allowance Taxation

Uncover the value of your pension wealth
pension lifetime allowance tax

The UK Pension Lifetime Allowance (LTA)

The pension Lifetime Allowance (“LTA”) is the maximum amount you can hold in UK pension funds before a taxation is applied to the excess.

The lifetime allowance taxation is deducted when a pension member triggers a Benefit Crystallisation Event (“BCE”). There are many types of BCE, including events such as where a member takes their pension benefits, reaches age 75, moves funds offshore, or dies. The full schedule of BCEs can be found in our LTA Guide.

The Lifetime Allowance limit is now FROZEN at £1,073,100 (2021/20)

 

This limit was due to increase each year with the Consumer Prices Index (CPI), however has been frozen until further notice.  Once total UK pension funds exceed the LTA, they could be liable for high taxation, dependent on how funds are withdrawn.

Many pension members qualify for an uplift to the lifetime allowance, dependent on their circumstances and the pension contributions they have made over the years. There are still ways to protect your pension funds against the lifetime allowance.

You may already have HMRC protection, which could include:

  • Primary or Enhanced Protection with HMRC
  • Overseas/International Protection with HMRC
  • Fixed or Individual Protection with HMRC

Alternatively, you may already have crystalised your pension, if you have:

  • Taken your Pension Commencement Lump Sum (PCLS)
  • Started a scheme pension
  • Purchased a pension annuity
  • Withdrawn pension income
  • Already transferred funds to a Qualifying Recognised Overseas Pension Scheme (QROPS)

The rate of tax payable on pension savings above the lifetime allowance depends on how the money taken out.

The LTA tax rate is:

  • 55% if you extract funds at once, as a lump sum, with no further liability to income tax
  • 25% if you nominate the funds to the ‘income drawdown’ pot – thus making those funds further taxable to your marginal rate of income tax when you withdraw them.

It is important to understand planning options. If your pension funds are valued over £800,000, seek advice before being stung for unexpected tax. Read our Guide to the Lifetime Allowance, which is a highly technical 8-page FREE guide.

Speak to a Professional

We introduce clients to regulated, professional and qualified advisers across the UK and internationally.

Our panel of adviser firms must undertake a comprehensive due diligence process. We only refer to firms with locally-appropriate regulation and insurance.

Ask us anything

didn't find what you are looking for?

search Our Site

About This Site

Whilst every care has been taken in the preparation of our website and publications, they are intended as a guide only. Readers are advised to seek professional regulated financial and tax advice before making any changes to their planning or investments. Our publications, including website and guides do not offer investment or pension advice and nothing in them should be construed as investment or financial advice. Our publications, including guides and website are not, and should not be seen as, a recommendation to use any particular investment or planning strategy.

You must carry out your own research before making any investment decision or change to your planning. The information published has been obtained from sources that we believe to be accurate. Although reasonable care has been taken, we cannot guarantee the accuracy or completeness of any information published. Articles and opinions published may be wrong and may change at any time. You must always carry out your own independent research and verify information and data you collect before making any financial decisions or planning changes.

Financial and pension planning is complex, and must be tailored to the individual client’s needs, objectives and circumstances. Teach Learn Resources Ltd do are not regulated by the Financial Conduct Authority and do not offer financial or tax advice. Our only business is to act as a professional introducer to regulated IFA firms worldwide. Contact us for more details about our panel of approved adviser firms and the regulation held in your jurisdiction.

Please see our Privacy & Terms for more information about the company, protection of your data and terms of use.

All content on this website and associated publications have been written by us and is the intellectual property of Teach Learn Resources Ltd. We take plagiarism seriously; our lawyers are watching.

Reviewmypensions.com is a trading style of Teach Learn Resources Limited. Teach Learn Resources Limited is registered in England and Wales company number 13349666. Registered Office 591 London Road, Cheam, Sutton, England SM3 9AG.

All rights Reserved