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(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.