Lifetime allowance
The lifetime allowance (LTA) for the 2021/22 tax year is expected to increase to £1,078,500 from 6 April 2021.
The LTA is a limit on the amount of pension savings that can be built up in pension schemes without triggering a tax charge when you take your pension.
Annual allowance
Annual allowance (AA) is set by the Treasury and is currently £40,000. The AA is the amount by which the value of your pension savings may increase in any one year without you having to pay an excess tax charge. Your personal AA may be less than £40,000 if your taxable income exceeds HMRC limits or you’ve accessed flexible benefits.
See our ‘Pensions basics’ section below to see what annual allowance could mean for you.
For more details and examples on calculating LTA or AA, you can read our Tax Controls and Pensions savings factsheet.