The Lifetime Allowance

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The lifetime allowance (LTA) is the total value of all pension benefits you can have without triggering an excess benefits tax charge.

If the value of your pension benefits when you draw them (not including any state retirement pension, pension credit or any partner's or dependant's pension you may be entitled to) is more than the lifetime allowance, or more than any protections you may have, you will have to pay tax on the excess benefits.

The LTA covers any pension benefits you may have in all tax-registered pension arrangements - not just the Local Government Pension Scheme (LGPS).

The LTA was introduced in 2006 and was reduced in 2012 and again in 2014.

Each time the lifetime allowance reduced, if you had already planned your pension savings on the basis of the higher LTA you could protect your pension savings by applying to HM Revenue & Customs (HMRC) for a protection certificate. 

The LTA has been steadily reducing from 2012/13, as below:

 

Tax Year Lifetime Allowance
2011/12 £1.8 million
2012/13 £1.5 million
2013/14 £1.5 million
2014/15 £1.25 million
2015/16 £1.25 million
2016/17 £1 million
2017/18 £1 million

 

The LTA will be increased in line with inflation from 2018 onwards.