The Lifetime Allowance (LTA) is a crucial concept in the UK pension system. It represents the maximum value of pension benefits an individual can accumulate throughout their lifetime without incurring additional tax charges. Here are the key points:

What is the LTA?

• The LTA was previously set at £1,073,100 for most individuals.
• It determined the total value of pension benefits (including both defined benefit and defined contribution pensions) that an individual could build up over their lifetime.
• Any pension savings exceeding this limit were subject to a tax charge.

Changes from April 2023 in the LTA

• As of 6 April 2023, the LTA charge has been abolished, meaning no one will face an LTA charge.

• The pension commencement lump sum (PCLS) remains capped at 25% of the current LTA unless individuals hold valid LTA or PCLS protection.

• Other allowances have also been adjusted.

  • Annual Allowance increased from £40,000 to £60,000.
  • Money Purchase Annual Allowance and Tapered Annual Allowance increased from £4,000 to £10,000.
  • Adjusted income for Tapered Annual Allowance increased from £240,000 to £260,0001.

LTA implications for individuals with pension savings

• Individuals with substantial pension savings should review their situation to ensure compliance with the new rules.
• Seek professional advice to optimise your pension contributions and understand the impact of these changes.

It’s important to remember that while the LTA charge is no longer applicable, it’s essential to stay informed about pension regulations to make informed decisions.

If you would like more information or have any questions, please contact your usual RSM contact.