What Is a Pension Lifetime Allowance and Why It Matters

The Lifetime Allowance (LTA) was the maximum amount you could save in a UK pension without paying extra tax. It was abolished from April 2024.

What the LTA Was

Tax Year	Lifetime Allowance
2023-24	£1,073,100
2022-23	£1,073,100
2021-22	£1,073,100
2020-21	£1,073,100
2016-17 (peak)	£1,250,000
2011-12 (originally)	£1,800,000

Since 6 April 2024, the LTA charge is 0%, and from April 2026 it’s expected to be fully removed from legislation.

What the LTA Charge Was

How You Took Money	LTA Excess Charge
As a lump sum	55% of excess
As income/ drawdown	25% of excess

The £1,073,100 Limit

This was frozen until 2028. A 40-year-old with £500K today could easily exceed £1M by retirement with average growth.

What Changes in 2026

The Finance Act 2024 abolished the LTA charge from April 2024. The LTA framework was replaced with:

New Measure	What It Does
Lump sum allowance	£268,275 (25% of old LTA)
Lump sum and death benefit allowance	£1,073,100
Overseas transfer allowance	Same as old rules

How This Affects You

Situation	Effect of LTA Abolition
Pension under £1M	No change
Pension over £1M	Previously faced tax — now safe
Already took benefits	Old LTA checks still apply
Have LTA protection	May want to surrender it

Why the LTA Mattered

If you had pension savings over £1,073,100 when you accessed them:

Scenario	Old Tax	New Tax
£1.2M pension, taken as income	£31,725 charge	£0
£1.5M pension, taken as lump sum	£234,650 charge	£0

What to Do Now

Action	Reason
Keep contributing	No more LTA cap
Review LTA protection	May not need it
Check your total pension	Know where you stand
Consider carry forward	Use unused allowances from previous years
Speak to a financial adviser	Personal circumstances vary

Other Pension Allowances (Still in Place)

Allowance	2025-26 Limit
Annual allowance	£60,000
Money purchase annual allowance (MPAA)	£10,000
Tapered annual allowance	Income > £260K

Bottom Line

The pension lifetime allowance is gone from 2024. Previously, saving over £1,073,100 triggered a tax charge of up to 55%. Now there’s no penalty. High earners and aggressive savers can grow their pension without the LTA ceiling. The annual allowance is still £60,000.