The Lifetime Allowance (LTA) is an individual’s lifetime limit on pension savings held in the UK. The allowance was originally set at £1,500,000 for 2006-07.
The allowance was increased annually and reached a high of £1,800,000 for 2010-11 and 2011-12. The allowance was subsequently reduced to £1,500,000, £1,250,000 and finally £1,000,000 for 2016-17. Lifetime allowance protections were introduced by the Treasury each time the allowance was reduced.
The allowance has been increasing in line with the consumer prices index (CPI) from 2018-19, with increases to £1,030,000 for 2018-19, £1,055,000 for 2019-20 and £1,073,100 for 2020-21.
The lifetime allowance remains at £1,073,100 for 2023/24 but in the Spring Budget 2023 the government announced it would be abolished from April 2024.
The value of defined benefit pensions for the LTA is calculated using a formula. This is: (Annual Pension x 20) + Lump Sum = Notional value for the LTA.
You can read more about Lifetime Allowance protections in our Pensions Tax Relief Briefing.
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