Lifetime Allowance
The Lifetime Allowance (also known as LTA) is the limit on the total value of pension savings you can build up through your lifetime without triggering an extra tax charge.
The standard Lifetime Allowance is set by HMRC. For the 20/21 tax year it is £1,073,100 for most people, rising to £1,078,900 for the 2021/22 tax year. This figure currently goes up every year in line with the Consumer Prices Index. If the total value of your pension savings exceeds this amount, you'd have to pay extra tax on anything over the Lifetime Allowance when you first start taking money — whether a lump sum or a regular income — from your pension.
Go to our Pension Calculator to see how much of your Lifetime Allowance each of your BTPS pension options uses up based on the current Lifetime Allowance limit.
Go to Pension Calculator
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HMRC Protection
Each time the government has reduced the LTA, they have introduced different methods of protecting benefits built up prior to the change from the additional tax charge, known as "protection". If your total pension savings exceeded £1 million on 5 April 2016 there are still two types of protection you can apply for – Individual Protection 2016 and Fixed Protection 2016.>
There is a tax charge if you exceed the LTA, the tax charge is payable on the amount in excess of the LTA. Different tax charges apply depending on how you take your benefits in excess of the LTA. The current tax charges are 25% if you use the excess for additional pension, or 55% if the excess is received as a lump sum. BTPS will pay the tax to HMRC on your behalf when you take your pension (if applicable), but you must declare the amount on your Self-Assessment tax return.
If you have protection, your personal LTA may be greater than the standard LTA. If you would like to know more about protection and how you can