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.

For changes to the Lifetime Allowance  please see Lifetime Allowance By Year and LTA Protection 2016.

Further information can be found on the factsheets below: