Ding Dong! LTA's Gone
(in a fashion)
The biggest change to pensions since… the last biggest change to pensions, officially came in to force from April 6th 2024.
Written by Ed Cannon
Independent Financial Advisor
From April 6th 2024. That is the abolition of the Lifetime allowance, which was previously £1,073,100. In 2023/24 the lifetime allowance was still there, but the charge for breaching it was taken away (it’s as confusing to us as it is to you). Before this any benefits taken over the lifetime allowance carried a 55% charge if taken as a lump sum or 25% charge if taken as an income.
Now, you are free to save as much as you want in your pension without the worry of any excess charge when you come to take benefits; If you had stopped contributing before your pension got too big then you are at liberty to contribute again (unless you have certain lifetime allowance protection where making a further contribution will invalidate it). However, there are still some allowances that have been kept and that is the Lump Sum Allowance (LSA) and the Lump Sum and Death Benefit Allowance (LSDBA).
The LSA is the amount you are allowed to take as a tax-free lump sum. While pension rules are that you can take 25% of the value as a tax-free lump sum, the LSA limits this to £268,275. That is of course unless you have lifetime allowance protection whereby the LSA will differ based on what kind of protection you have.
The LSDBA is the limit on the total amount of tax-free lump sums that can be paid, on death, in respect of an individual before marginal rate taxation arises. This includes any tax-free lump sums used up under the LSA, any benefits paid to you as a serious ill-health lump sum before age 75 or any tax-free Lump Sum death benefits payable in the event of your death before age 75. The limit is £1,073,100 but may be higher if you have an LTA protection.
It would be too long an article to go through all the minutiae of where these allowances do and don’t apply and they will not be relevant for the vast majority, which would create a long and boring article for the both of us. However, if you would like to book a meeting with one of our advisers to discuss your pensions, please contact us through the link below.