Was the Lifetime Allowance abolished?

Yes. The Lifetime Allowance was abolished from 6 April 2024. It was replaced with two new allowances: the Lump Sum Allowance (LSA) of £268,275 and the Lump Sum and Death Benefit Allowance (LSDBA) of £1,073,100.

What is the Lump Sum Allowance (LSA)?

The LSA of £268,275 caps the total tax-free cash you can take from all pension arrangements in your lifetime. It equals 25% of the old LTA (£1,073,100 × 25%). Exceeding the LSA means the excess lump sum is taxed as income.

What is the Lump Sum and Death Benefit Allowance (LSDBA)?

The LSDBA of £1,073,100 covers both lump sums taken in life AND death benefit lump sums. Amounts above the LSDBA that would have been LTA-exempt are taxed as income at the recipient's marginal rate.

Can I still have enhanced or fixed protection?

Yes. LTA protections (Enhanced Protection, Fixed Protection 2012/2014/2016, Individual Protection) translate into higher LSA and LSDBA limits. Enhanced Protection gives the highest allowances based on your pension value at April 2006.

How does the DB pension value factor into the new allowances?

For DB schemes, the capital value for allowance testing = annual pension × 20 + any separate lump sum. Each £1 of lump sum uses £1 of LSA; each £20 of capital value (pension-only) no longer counts against LSA (only lump sums matter from 2024).

What was the LTA charge before abolition?

Before April 2023, pension funds above the LTA (£1,073,100) were subject to a Lifetime Allowance Charge: 55% on lump sums, 25% on income taken above LTA. This charge was removed from April 2023 and the LTA fully abolished from April 2024.

Does pension income above the old LTA still face tax?

Pension income is always taxed as income (PAYE). The LTA charge on income drawn from large DC pots is abolished. There is no longer a 25% surcharge on pension income above £1,073,100 — only standard income tax.

How does the overseas transfer allowance work post-LTA?

The Overseas Transfer Allowance (OTA) of £1,073,100 applies when transferring UK pension rights to a Qualifying Recognised Overseas Pension Scheme (QROPS). Transfers above the OTA face a 25% overseas transfer charge.

What is Transitional Tax-Free Amount?

If you took pension benefits before 6 April 2024, a Transitional Tax-Free Amount reduces your available LSA and LSDBA. This is calculated based on the tax-free cash you've already received.

Should I now contribute more to my pension post-LTA abolition?

The abolition removes the 55% LTA penalty, making large pension pots more attractive. High earners can now grow pension pots above £1,073,100 without the old surcharge. The main constraints are now the Annual Allowance (£60,000/yr) and the new lump sum limits.

How does IHT interact with pensions post-LTA?

From April 2027, unused pension pots will be included in estates for IHT purposes. This changes the calculus for large pension pots — previously IHT-free pensions used as estate planning vehicles will be subject to 40% IHT on amounts above the nil rate band.

What happens to pension lump sum if you die before age 75?

Death before 75: lump sum death benefits are tax-free to beneficiaries up to the LSDBA (£1,073,100). Above the LSDBA, taxed as income. Death after 75: all death benefit lump sums taxed as income regardless of the LSDBA.

Pension Lifetime Allowance Transition Calculator

Post-LTA abolition — LSA, LSDBA, and tax-free cash calculator

Tax-Free Cash & Allowance Calculator

Key 2026 Limits: Lump Sum Allowance (LSA): £268,275 | Lump Sum & Death Benefit Allowance (LSDBA): £1,073,100

Total Pension Pot(s) Value (£)

Tax-Free Cash Already Taken (£)

LTA Protection Type

Income Tax Rate (marginal)

Post-LTA Abolition: What Changed in 2024?

From 6 April 2024 the Lifetime Allowance was fully abolished. The key change: there is no longer a blanket 55% or 25% charge on pension funds above £1,073,100. Instead:

Lump Sum Allowance (LSA): £268,275 total tax-free cash in your lifetime. Excess is taxed as income.
LSDBA: £1,073,100 covers both lump sums and death benefits. Applies mainly on death.
Pension income: Always taxable — but no special surcharge above any threshold.
IHT change (from 2027): Unused pensions included in estates.

Frequently Asked Questions

Was the LTA charge completely abolished?

Can I take more than £268,275 tax-free?

What about pension IHT changes from 2027?