The LTA is the total amount you can build up from all your pension savings in your lifetime without incurring a tax charge. The LTA from 6th April 2014 is £1.25 million. From 6th April 2016, the LTA will reduce to £1 million.
Exceeding the Lifetime Allowance
If you are over the limit, tax on the excess is charged at:
- 25% on your pension in excess of your personal LTA.
- 55% on your lump sum
However, the maximum tax free lump sum is the lower of ,
- 25% of the remaining capital value or,
- the lower of 25% of the standard LTA (based on £1.8m for FP2012, 25% of £1.5m for fixed protection FP2014, Primary and Enhanced Protection and 25% of the value of your lta at 05/04/2014 for Individual Protection IP2014.)
The pension commencement lump sum automatically crystallises before the pension therefore using any available LTA first.
Further information can be found on the factsheets below:
- Joining or Rejoining a Pension Scheme because of Auto-Enrolment and its effects on Enhanced or Fixed Protection
- Protected Pay Factsheet
- Reduced Lifetime Allowance and Fixed Protection
- Reduced Lifetime Allowance - Fixed Protection and Benefit Accrual in the HSC Pension Scheme
- Reduced Lifetime Allowance – How this affects members with Enhanced Protection