Lifetime Allowance Abolishment
02/02/2024
The Finance Act 2024 has received Royal Assent, meaning the legislation to remove the Lifetime Allowance will take effect from 6 April 2024.
Even though there will be no lifetime allowance limit on total pension benefits, there will be a cap for tax free payments out of pension schemes.
A ‘Lump Sum Allowance’ for tax-free cash on commencing a member’s retirement benefits and a ‘Lump Sum and Death Benefit Allowance’ for tax free death benefits to beneficiaries.
Anything over these limits is paid as taxable benefits at the recipient’s marginal rate of income tax.
The new limits currently mirror the soon to be abolished Lifetime Allowance:
Lump Sum Allowance: £268,275
(maximum tax-free cash is limited to the lower of this cap or 25% of funds being crystallised)
Lump Sum and Death Benefit Allowance: £1,073,100
Any tax-free lump sums previously paid to an individual will reduce their available allowance.
Members who have already used 100% of their Lifetime Allowance on commencing retirement benefits will have no further tax-free allowance.
