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Life Time Allowance

The intricacies of the highest tax levy in the UK.

Life Time Allowance: FAQ

What is the current pension lifetime allowance?

The lifetime allowance or LTA is the limit the government has set for the value of funds that you can have across all your pension pots in total. The current lifetime allowance is £1,073,100 and this figure will remain frozen at this level until April 2026.

What happens if I go over the lifetime allowance?

If you do exceed the lifetime allowance, you have two choices – you can take the excess as a lump sum less tax of 55% or you can keep the excess within the pension fund and pay a tax charge of 25% when taken as income. If you keep the excess in the fund you will pay income tax on it as normal when you withdraw it. If you have obtained some form of protection you will be able to protect more of your fund from these charges.


When the pensions Lifetime Allowance was introduced in 2006, it was originally set at £1.5m, with promised increases to £1.8m. Although since 2012 we've seen year on year decreases with the allowance bottoming at £1m in 2017/18, though it has since increased in line with inflation. As the allowance has shrunk while asset prices have grown, it’s not surprising that more people are having to pay for breaching it and this is likely to continue. 

Autumn 2020 saw the government report that the total value of pensions Lifetime Allowance charges it received in the 2019 to 2020 tax year was £342m – a 21 per cent increase on the previous year.

LTA- Fixed Protection 2016

You can apply for Fixed Protection 2016, whether your benefits exceed £1 million or not, as long as you do not already have one of the following protections:

  • Enhanced Protection

  • Primary Protection

  • Fixed Protection 2012

  • Fixed Protection 2014


For Fixed Protection 2016 you cannot build up more pension benefits after 5 April 2016. It is fixed at £1.25 million. Members with Fixed Protection 2016 may be able to take a tax free lump sum of up to £312,500.

Individual Protection 2016

You can apply to HMRC for Individual Protection 2016 as long as you do not have Primary Protection and the capital value of your pension benefits, from all your registered pensions schemes is equal to or over £1 million as at 5 April 2016.

Individual Protection 2016 allows you to build up further benefits. You will have an individual allowance equal to the capital value of your benefits at 5 April 2016 but capped at £1.25 million.

Pension benefits will be protected up to this amount and as a result you may be able to take a tax free lump sum of up to 25% of your individual allowance.


LTA Allowance (2006 - 2020).

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