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THE LIFETIME ALLOWANCE
The lifetime allowance 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, state pension credit or any spouse’s, civil partner’s or dependant’s pension you may be entitled to) is more than the lifetime allowance, or more than any primary lifetime allowance protection or enhanced protection you may have, you will have to pay tax on the excess benefits.
The lifetime allowance covers any pension benefits you may have in all tax-registered pension arrangements – not just the LGPS.
| Tax Year | Lifetime Allowance |
| 2012/2013 | £1.5 million |
| 2013/2014 | £1.5 million |
| 2014/2015 | £1.5 million |
| 2015/2016 | £1.5 million |
For pensions that start to be drawn on or after 6 April 2006, the capital value of those pension benefits is calculated by multiplying your pension by 20 and adding any lump sum you draw from the pension scheme.
For pensions already in payment before 6 April 2006, the capital value of these is calculated by multiplying the current annual rate, including any pensions increase, by 25. Any lump sum already paid is ignored in the valuation.
Does this affect me?
Most people will not be affected. Your pension would need to be approximately £65,000 per year to approach the lifetime allowance threshold of £1.5 million.
