Lifetime allowance

The lifetime allowance is the amount you can accumulate across all your pension schemes (excluding your state pension) and not incur an extra tax charge.

The standard lifetime allowance is set by HMRC and is due to increase each year in line with the consumer prices index. However, as of the budget on 3rd March 2021, the standard lifetime allowance has been frozen at £1,073,100 until April 2026.

Each time you take some income from your pension (a process referred to as crystallising your benefits) you will use a portion of your lifetime allowance.

Any income that you take from your pension savings above the lifetime allowance will be subject to tax. This will be 55% if it is taken as a lump sum, or 25% plus your standard rate of income tax if taken as income.

Lifetime allowance protection

You may be able to protect your pension savings from reductions to the standard lifetime allowance with lifetime allowance protection. If you already have lifetime allowance protection and have not provided us with the details, please contact us so we can update our records.

If you do not already have lifetime allowance protection, you may be able to apply for it, but in doing so you may no longer be able contribute to your pension. If considering applying, we recommend you consult a tax or financial adviser.