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The pension lifetime allowance

The pension lifetime allowance (LTA) was introduced as part of ‘pension simplification’ back on A-Day in April 2006. Many changes have been made to the allowance over the years making LTA planning far from straightforward.

What is the lifetime allowance?

The Pension lifetime allowance (LTA) represents the total amount of pension benefits that a client can build up over their lifetime that will enjoy full tax benefits. It is scheduled to be abolished altogether. Abolishing the Lifetime Allowance completely requires legislation via a future Finance Bill - meaning the change will only become law from April 2024. However, pension rules will change before that so that there will be no tax charge on breaches to the current Lifetime Allowance from 6 April 2023.

The allowance is £1,073,100. It applies to both defined contribution and defined benefit pensions with the benefits broadly calculated as follows:

  • Defined contribution schemes – the value of the individual’s pension savings
  • Defined benefit schemes – usually 20 times the pension received in the first year, plus any lump sum taken.

Any entitlement to the UK State Pension has no impact on the LTA.

Lifetime allowance protection

The LTA has been reduced on a number of occasions since its introduction. Each time this has happened, protection measures have been introduced to safeguard those affected.

How have clients been able to protect their lifetime allowance?

The following protections have been available at one time or another. Some of these may not have been (or be) available if another form of protection is already held by a client.

Primary protection

Introduced to protect people with pension savings of £1.5m or more on 5 April 2006. Contributions can still be made, although once relied upon it cannot be revoked. Applications could be made until 5 April 2009.

Enhanced protection

Anyone with certain pension rights as at 5 April 2006 could apply regardless of the value of the savings. Where held, no LTA test is made when benefits are taken and so no excess charge occurs. This protection can be lost in certain situations, such as where benefit accrual occurs. Applications could be made until 5 April 2009.

Fixed protection

Provides a fixed level of allowance based on the LTA prior to the reduction:

  • Fixed protection 2012 (available until 5 April 2012) £1.8m
  • Fixed protection 2014 (available until 5 April 2014) £1.5m
  • Fixed protection 2016 (still available) £1.25m

This protection is lost if a new arrangement is started (except for certain transfers) or where further benefit accrual is made.

Individual protection

This results in a personal LTA based on the following:

  • Individual protection 2014 (available until 5 April 2017) equal to the value of the pension rights on 5 April 2014, if more than £1.25m and capped at £1.5m.
  • Individual protection 2016 (still available) equal to the value of the pension rights on 5 April 2016, if more than £1.0m and capped at £1.25m.

Contributions and accruals can be maintained without losing this protection.

There are other situations where a client’s LTA can be enhanced or reduced (such as the transfer of an overseas pension to the UK).

Benefit crystallisation events (test trigger events)

There are certain times when pension benefits must be tested against the lifetime allowance. If insufficient LTA is available, a tax charge is likely to apply. These are ‘benefit crystallisation events’ (BCEs) and generally happen before or at age 75 (the exception is BCE 3 which can occur at any age).


Designating funds to drawdown during the member’s lifetime (Defined contribution arrangements)


When a person becomes entitled to a scheme pension before the age of 75 (Defined benefit or defined contribution arrangements)


Where a scheme pension already in payment increases beyond a permitted margin


Purchase of a lifetime annuity from a defined contribution arrangement before age 75


Uncrystallised defined benefits at age 75

BCE 5a

Reaching age 75 while still in drawdown

BCE 5b

Reaching age 75 with uncrystallised money purchase funds

BCE 5c

A member dies before age 75 and uncrystallised funds are designated to beneficiary flexi-access drawdown (after 5 April 2015) within the relevant two-year period

BCE 5d

A member dies on or after 3 December 2014 and before age 75, and uncrystallised funds are used to purchase a beneficiary annuity (after 5 April 2015) within the relevant two-year period


Payment of a relevant lump sum before age 75, other than on death (PCLS; serious ill health lump sum; UFPLS; LTA excess lump sum)


Payment of a lump sum death benefit before age 75 from uncrystallised funds if paid within two years (if after 5 April 2016)


Transfer to a qualifying recognised overseas pension scheme (QROPS) before age 75


Certain payments that are prescribed events (payments of arrears of pension after death; lump sums based on pension errors; PCLS-type lump sums paid after death).

Pension Lifetime allowance - adviser support package

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Important information

The content contained on this page is designed to give professional financial advisers technical information on retirement planning and pensions legislation and should not be relied upon.

This represents a summary of our understanding of the law at the date of its last review (March 2021). Tax limits, benefits, allowances and rules are often subject to change and may change in future. Advisers and individuals should check that tax limits, allowances and rules have not changed.

The value of benefits depends on individual circumstances. The minimum age you can normally access your pension savings is currently 55, and is due to rise to 57 on 6 April 2028, unless you have a lower protected pension age. Different options may have different effects for tax purposes, different implications for pension provision and different impacts on other assets and financial planning.