Answers · UK 2025/26

How does pension lifetime allowance abolition affect me?

The lifetime allowance (LTA) was abolished on 6 April 2024 and replaced with two new caps: the £268,275 Lump Sum Allowance (LSA) on tax-free cash, and the £1,073,100 Lump Sum and Death Benefit Allowance (LSDBA) on tax-free lump sums paid to you or your beneficiaries. The 25% LTA charge no longer exists.

Last updated: 16 May 2026Last reviewed: 16 May 2026How we verify

Full answer

Until 2023/24 any pension value over £1,073,100 incurred a 25% or 55% tax charge when drawn. From 6 April 2024 the LTA test is replaced with these allowances: LSA £268,275 (caps lifetime tax-free PCLS); LSDBA £1,073,100 (caps combined tax-free lump sums during life and on death before age 75); Overseas Transfer Allowance £1,073,100 (for QROPS). Income above any allowance is simply taxed as PAYE income — there is no separate punitive LTA charge. Worked impact: a £1.5m DC pot now allows £268,275 tax-free cash and the remaining £1,231,725 is taxed as income when drawn — vastly better than the old 25% lump-sum LTA charge. Those with old fixed or individual protections may have a higher LSA — keep your HMRC certificate. Death-before-75: lump sums up to LSDBA are tax-free to beneficiaries; above that, taxable as income. Death after 75: all pension income to beneficiaries taxable at their marginal rate (and from April 2027 most unused pensions will fall inside the inheritance tax estate).