What is the lifetime allowance?

The lifetime allowance (LTA) is the maximum amount of pension scheme funds that can be or deemed to be, 'crystallised' (usually to provide benefits), in relation to all of a pension scheme Member's registered pension schemes, without incurring a penalty tax charge. Each time you crystallise benefits (and at age 75 when there is a further test) some or all of the lifetime allowance will be used up.


The standard lifetime allowance for tax year 2020/21 is £1.0731 million and is frozen at this limit until April 2026.  For tax year 2019/20, it was £1.055 million; for 2018/19, it was £1.03 million and for tax year 2017/18, it was £1.00 million.

Provided the value of all an individual's benefits from all Registered Pension Schemes which are put into payment do not exceed their remaining lifetime allowance there should be no tax penalty.

However, when benefits are put into payment and the total value of the fund used to provide the benefits exceeds the individual's remaining lifetime allowance, there will be a tax charge on the excess of 25% if the excess is used to provide a drawdown pension or to buy an annuity, or 55% if the excess is taken as a lump sum (an option that is only available up to age 75).

Types of lifetime allowance protection.

Lifetime allowance protection was introduced to prevent individuals with previously accumulated pension savings under existing regimes being disadvantaged should their funds exceed subsequent reductions in the standard lifetime allowance.

The main forms of protection are:

Enhanced protection
 
  • Only available to those who had accrued pension benefits up to 5 April 2006 and from that date, had no contributions paid to any registered pension schemes and ceased active membership of any final salary/defined benefit pension schemes.
  • The pension funds of a pension scheme member with enhanced protection are not tested against the lifetime allowance, except where the member’s maximum tax-free cash lump sum entitlement in relation to all their registered pension schemes is limited to 25% of the greater of the standard lifetime allowance and £1.5 million.
More on Enhanced Protection
 
Primary protection
 
  • Only available to those whose pension funds at 5 April 2006 had a total value of more than £1.5 million. It provides them with a higher personal lifetime allowance as a factor of the standard lifetime allowance up to the tax year 2010/11 and since then, as a factor of £1.8 million.
  • For example, a pension scheme member with a primary protection factor of 0.2 would have a personal lifetime allowance of £2.16 million
  • For BCEs on after 6 April 2014, the amount of primary protected lifetime allowance used up by prior BCEs will need to be adjusted to take into account changes in the standard lifetime allowance over time. The calculation of the adjustment will depend on whether the prior BCE occurred between 6 April 2006 and 5 April 2014, or after 5 April 2014.

Where the previous BCE was on/after 6 April 2014, apply the % of lifetime allowance used at that BCE to the current standard lifetime allowance (£1,073,100 for tax year 2021/22).

More on primary protection

Fixed protection 2012
 
  • Only available to those who had accrued pension benefits up to 5 April 2012 and from that date, had no contributions paid to any registered pension schemes and ceased active membership of any final salary/defined benefit pension schemes.
  • This gives a personal lifetime allowance of £1.8 million.
More on fixed protection 2012
 
Fixed protection 2014
 
  • Only available to those who had accrued pension benefits up to 5 April 2014 and from that date, had no contributions paid to any registered pension schemes and ceased active membership of any final salary/defined benefit pension schemes.
  • This gives a personal lifetime allowance of £1.5 million.
More on fixed fixed protection 2014
 
Individual protection 2014
 
  • Only available to those whose pension funds at 5 April 2014 had a total value of more than £1.25 million.
  • This gives a personal lifetime allowance of the lower of the value of their pension funds at 5 April 2014 and £1.5 million.
More on Individual protection 2014
 
Fixed protection 2016
 
  • Only available to those who had accrued pension benefits up to 5 April 2016 and from that date, had no contributions paid to any registered pension schemes and ceased active membership of any final salary/defined benefit pension schemes.
  • This gives a personal lifetime allowance of £1.25 million.

more on fixed protection 2016

Individual protection 2016
 
  • Only available to those whose pension funds at 5 April 2016 had a total value of more than £1.00 million.
  • This gives a personal lifetime allowance of the lower of the value of their pension funds at 5 April 2016 and £1.25 million.
More on individual protection 2016
 

If at any time the standard lifetime allowance exceeds a member’s personal lifetime allowance, the standard lifetime allowance will then apply instead.

It is possible for a member to have more than one form of lifetime allowance protection.

Other forms of protection include enhancement factors in respect of pension credits received following a pension sharing order on divorce and transfers received from a qualifying recognised overseas pension scheme (QROPS).

There are currently only two types of lifetime allowance protection which individuals can still apply for:

Protection Am I eligible and what does it do? Can I keep building up my pension?
Other types of protection you can hold at any time
Other types of protection you cannot hold at the same time
Individual protection 2016 Available provided your pension savings were worth more than £1 million at 5 April 2016. 

Protects your lifetime allowance to the lower of:
  • the value of your pension savings at 5 April 2016
  • £1.25 million.
Yes, but when you put benefits into payment and their value exceeds your protected lifetime allowance, the excess will be subject to a tax charge. Enhanced protection

Fixed protection 2012

Fixed protection 2014

Fixed protection 2016
Primary protection

Individual protection 2014
Fixed protection 2016 Available provided you or your employer haven't added to any of your pension schemes since 5 April 2016 and had opted out of any workplace pension scheme by 5 April 2016.

Fixes your lifetime allowance at £1.25 million.
No, except in limited circumstances. If you do, you will:
  • lose your Fixed protection 2016
  • pay tax on any excess above the standard lifetime allowance when you put benefits into payment.
Individual protection 2014

Individual protection 2016
Enhanced protection

Primary protection

Fixed protection 2012

Fixed protection 2014
  • Individual protection 2016 will remain dormant until you lose or give up one of your previous protections.
  • Individual protection 2014 will override fixed protection 2016 but any contributions paid after 6 April 2016 will result in your fixed protection 2016 being lost.
  • ​You must apply online to HMRC for fixed protection 2016 or individual protection 2016. Protection can be applied for online to HMRC.

Please note:

  • If protection is lost, or if pension savings put into payment exceed any protected level of lifetime allowance, a lifetime allowance charge may apply. Protection may also be affected by auto-enrolment.
  • The lifetime allowance charge for benefits put into payment in excess of the lifetime allowance is 55% if paid as a lump sum, or 25% if paid as pension income, which itself is then subject to tax under usual PAYE rules.
  • The value of an individual's benefits that came into payment before 6 April 2006 is only taken into account for lifetime allowance purposes where the individual also has benefits that come into payment after 5 April 2006.
  • If the standard lifetime allowance increases beyond an individual's protected lifetime allowance, the standard lifetime allowance will then replace the lower protected lifetime allowance.

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