(LTA) Lifetime Allowance
- The LTA takes account of the total value of an individual’s pension benefits, excluding state benefits and dependants’ pensions, across all registered schemes.
- The amount of the allowance in 2012/13 is £1.5 million and this will increase annually.
- When retirement benefits are drawn, the value of all pension scheme benefits are added together and tested against the LTA.
- Any benefits above the LTA will be subject to a tax charge.
To assess whether you would be affected the following formula should be applied to your benefits:
(Annual Pension X 20) + Lump Sump/Lifetime Allowance X100 = % of LTA used
- If the percentage exceeds 100%, you will be liable for the LTA charge unless you have a transitional protection certificate.