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Tax changes: Lifetime Allowance

Pensions tax changes currently going through Parliament are likely to see the Lifetime Allowance (LTA) abolished.

Changes are expected to come into force from 6 April 2024

Two new allowances have been outlined which would take effect from 6 April 2024:

  • The Lump Sum Allowance (LSA) would largely apply to tax-free lump sums you can take as part of your retirement.
  • The Lump Sum and Death Benefit Allowance (LSDBA) would apply to lump sums covered by the LSA plus additional lump sums payable in circumstances such as death or serious ill health.

The changes proposed in the Finance Bill 2023/24 may limit the amount of tax-free cash an individual can take from their pensions, in certain circumstances. This may affect how much tax you pay on your pension benefits, especially if you have significant benefits in USS or other pension arrangements that are close in value to the former Lifetime Allowance (LTA) limit £1,073,100.

For tax purposes, the current LTA legislation will apply until 6 April 2024. If you want to retire before 6 April 2024 under the current LTA tax regime, we’ll need the date you intend to retire along with all the necessary information to process your retirement, including the official notification of retirement form from your employer, your completed retirement forms and any other supporting documentation listed in your retirement form before the 6 April 2024. Please note that benefits and savings may not be paid on the date of retirement if the requested documentation is received less than eight weeks prior to the date of retirement.

If you intend to retire before 6 April 2024 and we have not received the information necessary to process your retirement before this date, we will not be able to process your retirement application before 6 April 2024 and the new tax legislation will apply.

We’ll update our tax pages, once the new measures have been confirmed, so check back soon if you think this will affect you. If you think you may be affected by these changes, you should consider taking independent financial advice.

Published: 20 February 2024

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