If you’ve seen the news lately on the Spring Budget about the LTA being removed, you might be wondering what this means for you. The LTA was previously set to remain at £1,073,100 until April 2026, but in March 2023, the government confirmed that it was to be abolished.
The LTA was a limit on the amount of pension benefit that can be paid from pension schemes without triggering a tax charge. Pension benefits, when taken, were tested against the LTA by multiplying the pension taken by 20 and adding on any lump sum taken at the same time.
However, removal of the LTA now means that any pension benefits paid in excess of the LTA will now be taxed at a person’s marginal rate, rather than having to pay a fixed tax charge of 40% or 55% on the excess benefits.
Page 7 of the digital annual pension statement you’ll receive in June will show the percentage of LTA you’ve used with your deferred EAPF pension.