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Maximum Allowances

When Might You Pay Additional Tax on Your Pension?

Until the 5th April 2024 there was a Lifetime Allowance limit, the total value of payouts from all your pension schemes - whether lump sums or retirement income - that could be made without triggering an additional tax charge.

The Lifetime Allowance was £1,073,100 when it was abolished in April 2024. However, whilst the current allowance might have seemed quite big, the allowance had actually been dramatically reduced in recent years, from its height of £1,800,000 million in the 2010/11 tax year.

The Lifetime Allowance was replaced by:
1. Lump Sum Allowances - This is the maximum Tax Free Cash you can receive from your pension funds. This is 25% of the fund, subject to a maximum £268,275 benefit.
2. Lump Sum Death Allowance - £1,073,000 is the maximum you can pass tax free upon death. Any excess is charged at the beneficiaries marginal rate of taxation.

You can apply to protect the benefits you have accrued, by means of either Fixed Protection or Individual Protection, BUT, we strongly recommend you take advice before doing this.

Fixed protection
This allows you to retain the higher £1.25 million allowance (although you will lose the protection if any pension contributions or accruals are made from 6 April 2016 onwards - so you will have to cease making or being part of any future pension scheme)

Individual protection
This allows you to retain a lifetime allowance based on the value of your pension as at 5 April 2016, subject to a limit of £1.25m. It is only available if your pension pots were worth at least £1 million, as of 5th April 2016. The advantage of this protection is that pension contributions can still be made.

* Tax Information given is based on the 2025/26 tax year, and may be subject to change in the future. Any contributions in excess of you annual allowances will be taxed at your marginal rate.

THE VALUE OF A PENSION IS NOT GUARANTEED AND CAN GO UP AND DOWN DEPENDING ON INVESTMENT PERFORMANCE. YOU COULD GET BACK LESS THAN YOU'VE PAID IN.