The lifetime allowance (LTA)
This guidance is for information only. Following the announcement in the 2023 spring budget the LTA is being abolished from April 2024. The LTA charge was removed from 6 April 2023. If you were in receipt of your pension benefits before this date any reduction in pension benefits arising from a LTA charge already applied will continue.
The below information reflects the position prior to 6 April 2023.
In 2006, the Government introduced the lifetime allowance (LTA), which limited the amount that you can save into registered pension schemes on a tax efficient basis. Pension savings that exceed the LTA are subject to large tax charges.
The Government has regularly adjusted the LTA. The 2019-20 allowance of £1.073 million is slightly higher than in previous years but much lower than the 2010-12 period when it was £1.8 million (see Appendix 1 for the historic and present LTA levels).
Your pension scheme administrator must check your pension benefits against the LTA on specified occasions – known as benefit crystallisation events (BCEs). The need for a BCE arises when you start to draw upon your pension or when you reach the age of 75.
The LTA is relevant if you are approaching retirement. If you think that you are likely to exceed the LTA when you retire, you should seek financial advice and explore your available options.
There is also a limit on the amount that you can save tax-efficiently for your pension (or pensions) each year, see Pensions and tax – the annual allowance.