The Lump Sum Allowance 2026/27: How Much Tax-Free Cash You Can Really Take
The Lump Sum Allowance caps tax-free pension cash at £268,275 in 2026/27, replacing the old Lifetime Allowance mechanism. How it works, and the separate £1,073,100 Lump Sum and Death Benefit Allowance.
From Lifetime Allowance to Lump Sum Allowance
Until April 2024, the UK operated a Lifetime Allowance — a single cap on the total value of tax-relieved pension savings a person could build up, with a hefty tax charge applying to anything above it. From 6 April 2024, that general Lifetime Allowance charge was abolished and replaced with two more specific allowances that focus purely on tax-free lump sums, rather than total pension value.
Pension Calculator
Estimate your pension pot at retirement and projected annual income.
Open Pension calculatorThe Lump Sum Allowance: £268,275
The Lump Sum Allowance is the maximum amount of tax-free cash you can take across all your pensions over your lifetime — set at £268,275 for 2026/27. This figure is exactly 25% of the old £1,073,100 standard Lifetime Allowance, reflecting the fact that pension tax-free cash has traditionally been calculated as 25% of the value being accessed.
Worked example: a large pension pot
Someone approaching retirement has a defined contribution pension pot worth £900,000, and has not previously used any Lump Sum Allowance.
- Standard tax-free cash entitlement: 25% of £900,000 = £225,000
- Available Lump Sum Allowance: £268,275
- Since £225,000 is below the £268,275 allowance, they can take the full £225,000 tax-free, with no restriction from the Lump Sum Allowance in this case
Worked example: hitting the cap
A different pension saver has built up total pension benefits worth £1,300,000 across several pensions.
- Standard 25% tax-free cash calculation: 25% of £1,300,000 = £325,000
- Available Lump Sum Allowance: £268,275
- Because £325,000 exceeds the £268,275 cap, only £268,275 can be taken tax-free
- The remaining amount that would otherwise have been tax-free cash (£325,000 − £268,275 = £56,725) is instead taxed as income at their marginal rate when taken
The separate, larger Lump Sum and Death Benefit Allowance
A second, distinct allowance — the Lump Sum and Death Benefit Allowance — is set at £1,073,100 for 2026/27 (matching the old Lifetime Allowance figure exactly). This tracks the combined total of all your tax-free lump sums during life plus certain tax-free lump sum death benefits paid to your beneficiaries when you die — for example, an uncrystallised pension paid out as a tax-free lump sum on death before age 75. Because it's a much larger figure than the £268,275 Lump Sum Allowance, it tends to only become relevant for people with very substantial pension wealth, or significant unused pension value passed on as a death benefit.
Protections from the old Lifetime Allowance system
Anyone who registered for one of the various Lifetime Allowance protections — such as Fixed Protection or Individual Protection, typically obtained before April 2016 by people whose pensions were already close to or above the standard Lifetime Allowance at the time — may have a different, often higher, personal Lump Sum Allowance than the standard £268,275. If you built up a large pension before 2016 and registered for protection, it's worth confirming your specific allowance rather than assuming the standard figure applies.
isa-types-explainedBottom line
The Lump Sum Allowance of £268,275 is now the key figure capping how much tax-free cash can be taken from pensions in total, having replaced the old Lifetime Allowance charge from April 2024. For most pension savers with total pensions below roughly £1,073,100, the standard 25% tax-free cash rule will comfortably fit within the allowance — it's only larger pension pots, or those with older protections to check, where the cap becomes a live consideration.
Sources
Frequently asked questions
What is the Lump Sum Allowance?
The Lump Sum Allowance (LSA) is the maximum amount of tax-free cash you can take from your pensions over your lifetime, set at £268,275 in 2026/27. It replaced the old Lifetime Allowance system from 6 April 2024.
How is £268,275 calculated?
£268,275 is 25% of the old standard Lifetime Allowance of £1,073,100, which was frozen at that level before being abolished as a general tax charge and replaced by the separate lump sum allowances from April 2024.
What is the Lump Sum and Death Benefit Allowance?
This is a separate, larger allowance of £1,073,100 in 2026/27, covering the total of all tax-free lump sums you take during your life plus certain tax-free lump sums paid to beneficiaries on your death, such as an uncrystallised pension paid out as a lump sum.
What happens if I exceed the Lump Sum Allowance?
Any tax-free cash you would otherwise be entitled to above your available Lump Sum Allowance is instead taxed as income at your marginal rate, rather than being paid tax-free, when you take it.
Does everyone get the full £268,275 Lump Sum Allowance?
Not necessarily — people who registered for one of the various protections against the old Lifetime Allowance (such as fixed protection or individual protection) may have a different, sometimes higher, personal Lump Sum Allowance, so it's worth checking your own protection status if you built up a large pension before April 2016.
Is the £268,275 figure going up over time?
It has been frozen since the underlying £1,073,100 Lifetime Allowance figure was frozen in the 2021 Budget, and remains frozen at £268,275 for 2026/27, with no announced plan for it to rise with inflation.
Try the calculators
Related reading
The Money Purchase Annual Allowance 2026/27: How Accessing Your Pension Cuts Future Contributions
Once you flexibly access taxable pension income, the Money Purchase Annual Allowance cuts your future tax-relieved pension contributions from £60,000 to £10,000 a year in 2026/27. What triggers it and what doesn't.
Pension Wise 2026/27: Free Guidance Before You Touch Your Pension Pot
What Pension Wise is, who can book a free appointment from age 50, what it does and doesn't cover, and why it's not the same as regulated financial advice — with a worked example of when to use it.
Small Pot Pension Lump Sums 2026/27: Cashing In Pensions Under £10,000
How the small pot pension rule lets you cash in pension pots worth up to £10,000 without affecting the Money Purchase Annual Allowance — worked example and the 3-pot limit for personal pensions.