Since 6 April 2024, the old ‘Lifetime Allowance’ (which was a limit on the amount of pension benefits that can be paid from a person’s pension schemes without triggering a tax charge), has been replaced with a ‘Lump Sum Allowance’ (LSA) of £268,275. The LSA limits the amount of tax free lump sums (and the tax free elements of lump sums) that you can take in your lifetime.
You’ll also need to have available Lump Sum and Death Benefit Allowance (LSDBA), which, at £1,073,100, is higher than the LSA. If you have available LSA, you will usually have sufficient LSDBA, unless you have taken a Serious Ill Health Lump Sum from another pension arrangement.
Changes to deferred member annual pension statements
As a result of the LTA being replaced by the LSA, this means that pages 7 & 8 of your annual pension statement will look slightly different. From this year, it will no longer need to show the percentage of the LTA that your EAPF pension benefits have used. Therefore you may notice these fields no longer showing on your statement.
For more information on the abolition of the LTA, as well as the introduction of the LSA and LSDBA, please visit https://www.gov.uk/government/publications/lifetime-allowance-guidance-newsletter-march-2024/lifetime-allowance-guidance-newsletter-march-2024
Annual allowance
The Annual Allowance (AA) limit is set by the Treasury and is currently £60,000 for the 2024/25 tax year. This 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 £60,000 if your taxable income exceeds HMRC limits or you’ve got money purchase/defined contribution pension rights held in another pension scheme, where those rights have been taken as ‘flexible benefits’.