What was the pension Lifetime Allowance and has it been abolished?

Full answer

The pension **Lifetime Allowance (LTA)** was the total value you could accumulate across all pension arrangements without triggering an LTA charge. It was set at £1,073,100 before its abolition. **Abolition from 6 April 2024:** The Finance Act 2024 abolished the LTA entirely. There is no longer a cap on the total value of your pensions. **What replaced it — two new allowances:** 1. **Lump Sum Allowance (LSA): £268,275** This limits the total **tax-free cash** you can take from all pensions in your lifetime. The 25% tax-free cash rule still applies — but your total tax-free cash cannot exceed £268,275 across all pensions. 2. **Lump Sum and Death Benefit Allowance (LSDBA): £1,073,100** This limits the total tax-free lump sums (including serious ill-health lump sums and certain death benefits) that can be paid out without income tax. **Impact on DB/DC pensions:** - **Defined contribution:** You can grow your pot beyond old LTA levels — but tax-free cash is still capped at £268,275 (25% of £1,073,100). - **Defined benefit:** Schemes calculate a "pension commencement lump sum" against the LSA. High earners with large DB entitlements may have already used some or all of the LSA. **Protection regimes:** Individuals who held **Enhanced Protection** or **Fixed Protection** (registered before April 2023) retain higher tax-free cash entitlements based on their protection certificate. **April 2027 IHT change:** From April 2027, unspent pension funds will be brought into scope for **Inheritance Tax**. This significantly changes retirement planning — drawdown vs annuity decisions will need to factor in IHT exposure.

Related guides

• Pension Contribution Guide