UNDERSTANDING THE TERMS
Technical terms appear in bold and are underlined when first used. You can click on these terms to to see their definitions. Some definitions open in a window within this page, others which have more detailed explanations as provided in gov.uk, open in another window.
The lifetime allowance (LTA) was an overall limit on the value of your pension benefits from all registered pension schemes before a tax charge would apply. This was known as the lifetime allowance charge.
The lifetime allowance charge was removed with effect from 6 April 2023. However, the LTA could still affect the maximum one-off lump sum you can receive free of income tax when you take benefits. Lump sums taken in the 2023/2024 tax year that would previously have been subject to the lifetime allowance charge were instead taxed as income.
The LTA was abolished with effect from 6 April 2024, with transitional arrangements in place for benefits taken before 6 April 2024.
We have provided further details below.
The new regime
The LTA has been replaced with a new regime which has two new allowances:
Fixed and individual protection
If you have one of the existing LTA protections, your lump sum allowance and lump sum and death benefit allowance will be increased. Broadly, the effect will be to maintain the entitlement you had prior to the abolition of the LTA based on your level of protection.
It is not too late to apply for fixed protection 2016 or individual protection 2016. The deadline for applications is 5 April 2025. If you think you may be affected by the LTA or the new allowances and are interested in applying for protection, please click on the following link for more information.
How the above changes to pensions tax may affect you
Please click on the scenario that applies to you.
- 1. If you have not taken your Rothesay benefits
- If you take your benefits and opt to take a lump sum, this will be assessed against the lump sum allowance. You will also need to declare any lump sums that you have taken from other pension arrangements.
- If you opt to take a lump sum, we will test against your available lump sum allowance and confirm how much it has used.
- 2. If your benefits are already in payment
- The changes explained above will not affect your benefits already in payment, which will continue to be subject to UK tax at your marginal income tax rate for the tax year.
- If you have any pensions not yet in payment from other pension arrangements, you will need to let these pension arrangements know of any tax-free lump sums you have already taken (including any from Rothesay) when you take your benefits.
- If you have taken lump sums close to the limit and have further benefits that may take you over then you may want to consider applying for fixed protection 2016 or individual protection 2016, as explained above.