Lifetime allowance

By Tolley
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The following Personal Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Lifetime allowance
  • Lifetime allowance protection
  • Benefit crystallisation events
  • What do you need to do?

The maximum amount that an individual can build up in pension savings is limited in two ways:

  • first, the annual allowance limits the amount that can be paid into pensions and benefit from tax relief (or the value attributed to increases in scheme benefits for defined benefits pensions). See the Annual allowance guidance note
  • second, the lifetime allowance limits the total tax-relieved value that can be accumulated into registered pension schemes. Its operation and the lifetime allowance charges that can arise are discussed below

The lifetime allowance was introduced from 6 April 2006. When a member of a scheme takes benefits in excess of his applicable lifetime allowance, he will be liable to a tax charge and the amount of the tax charge will depend on whether the excess benefits are taken as a lump sum or not.

The amount of the lifetime allowance has changed frequently:

Tax yearLifetime allowance
2019/20£1,055,000
2018/19£1,030,000
2016/17 to 2017/18£1m

More on Pensions: