Lifetime Allowance

Lifetime Allowance

The Lifetime Allowance (LTA) sets the total value of all the pension savings you can build up before having to pay extra tax. This figure is currently £1,073,100, but the charge for breaching the LTA has been removed from 6 April 2023, with the allowance abolished entirely from April 2024.

Although if your pension savings exceed the LTA, you’ll no longer be liable to pay the extra tax charge, Pension Commencement Lump Sums will continue to be limited to 25% of the current LTA.

For defined benefit pensions like the HP Plan, the ‘value’ of your pension would be calculated by multiplying your initial annual pension by 20, and then adding it to any pension commencement lump sum received. This would then be added to the value of any other pensions you may have in addition to your Plan benefits to determine whether the Lifetime Allowance has been reached.

In practice, it’s expected that only a small number of members of the Plan will reach the Lifetime Allowance. You should take independent financial advice if you believe that you may be affected by it.

It is your responsibility to check this information is up to date and correct.  The definitive source for this is the gov.uk website.