Lifetime allowance

By Tolley
  • (Updated for Budget 2020)

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
2016/17 to 2017/18£1m
2014/15 to 2015/16£1.25m
2012/13 to 2013/14£1.5m
2010/11 to 2011/12£1.8m


Note that when the ‘standard lifetime allowance’ is referred to below, this means the figure in the above table for the applicable tax year.

From 6 April 2018, the lifetime allowance increases annually in line with increases in the Consumer Price Index (CPI). 

FA 2004, s 218(2A)–(2D)

Members disadvantaged by the introduction of, or by reductions in, the lifetime allowance could apply to protect their pension savings. The various protections are discussed below.

Each time a member crystallises some benefits from a pension (known as a benefit crystallisation event (BCE)), the capital value of benefits drawn is calculated and the lifetime allowance prorated. The re

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