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Lifetime Allowance up to 6 April 2024

This is the total, tax-privileged capital value (£1,073,100 for 2023/24) of all your pension arrangements that you can build up during your lifetime.

What is the Lifetime Allowance?

Lifetime Allowance – Video Transcript

Read transcript (112KB, PDF)

The lifetime allowance is the total value of all pension benefits you can have without triggering an excess benefits tax charge. In the Spring Budget in 2023 the Government announced it was removing the lifetime allowance tax charge for 2023/24 and would take steps to abolish the lifetime allowance from 2024/25 through a future Finance Bill. If the value of your pension benefits when you take them (not including any state retirement pension, state pension credit or any partner’s or dependant’s pension you are entitled to) is more than the lifetime allowance, or more than any protections you may have, you will have to pay tax on the excess benefits.  

The lifetime allowance covers any pension benefits you have in all tax-registered pension arrangements – not just the LGPS (NI). 

The lifetime allowance was introduced in 2006 and was reduced in 2012, 2014 and again in 2016. Each time the lifetime allowance reduced, if you had already planned your pension savings based on the higher lifetime allowance, you were able to protect your pension savings by applying to HMRC for a lifetime allowance protection. These protections are explained under the section on protections.    

The lifetime allowance steadily reduced from 2012/13 to 2017/18. From 2018/19 to 2020/21 the lifetime allowance increased each year in line with inflation. The Government has announced that the lifetime allowance will remain at its current level until the end of the 2025/26 financial year. 

Tax YearLifetime Allowance
2011/12£1.8 million
2012/13£1.5 million
2013/14£1.5 million
2014/15£1.25 million
2015/16£1.25 million
2016/17£1.00 million
2017/18£1.00 million
2018/19£1.03 million
2020/21 to 2025/26£1,073,100
Lifetime Allowance 2011-2026

How is the lifetime allowance calculated?

For pensions that you first take on or after 6 April 2006, the capital value is worked out by multiplying your annual pension by 20 and adding any lump sum you take from the pension scheme. The figures used for this calculation are those that you are taking e.g. after any conversion of pension for additional lump sum. 

Each time you take payment of a pension benefit, the capital value of the benefits you are taking is expressed as percentage of the lifetime allowance limit that applies on that date and is deducted from your available lifetime allowance. So, even if your pensions are small and individually will not be more than the lifetime allowance, you should keep a record of any pensions you receive. 

If you have a pension that was first paid before 6 April 2006, this will also be treated as having used up part of your lifetime allowance. For these pensions, the capital value is calculated by multiplying the current annual rate, including any pensions increase, by 25. Any lump sum already paid is ignored in the valuation.  

It is expected from 6 April 2023 when you take your LGPS (NI) benefits, NILGOSC will calculate the capital value of your pension benefits.

If your benefits exceed the lifetime allowance and you take a lump sum in excess of £268,275, the excess amount will be taxed at your marginal rate. It is expected that this tax charge would be paid by a reduction to your total lump sum.

Lifetime allowance protections

The lifetime allowance reduced from £1.25 million to £1 million from 6 April 2016. Two new protections were introduced called Fixed Protection 2016 and Individual Protection 2016. These protections are the same in design as Fixed and Individual Protections 2014 which were introduced when the lifetime allowance reduced from £1.5 million to £1.25 million in 2014.  

Individual Protection 2016 (IP2016)

You can apply for IP2016 if your pension savings were valued at over £1 million (including pensions already in payment) on 5 April 2016. However, if you have primary protection you can’t apply for IP2016. 

IP2016 gives a protected lifetime allowance equal to the value of your pension rights on 5 April 2016 – up to a maximum of £1.25 million. You will not lose IP2016 by making further savings in your pension scheme, but any pension savings in excess of your protected lifetime allowance will be subject to a lifetime allowance charge. 

Fixed Protection 2016 (FP2016)

You can apply for FP2016 if you expect your pension savings to be more than £1 million (including pensions already in payment) when you come to take them on or after 6 April 2016. FP2016 can be used to reduce or mitigate the lifetime allowance charge. 

FP2016 is lost if your benefits increase by more than the cost-of-living increase in any one tax year. If you apply for and wish to keep FP2016 you must have opted out of the LGPS before 6 April 2016. The cost-of-living increase in 2016/17 was zero. Any increase in your benefits on or after 6 April 2016 will result in the loss of FP2016.  

FP2016 will also be lost if you start a new pension arrangement, other than to accept a transfer of existing pension rights, or if you pay contributions into a money purchase pension arrangement, other than to a life assurance policy providing death benefits that started before 6 April 2006. You will also be subject to restrictions on where and how you can transfer benefits. 

You can’t have FP2016 if you already have primary, enhanced, fixed protection 2012 or fixed protection 2014. With FP2016 your lifetime allowance is fixed at £1.25 million rather than the standard lifetime allowance.  

If you lose FP2016 you must electronically notify HMRC within 90 days of the day on which you could first reasonably be expected to have known that you had lost this protection. Failure to do so could result in a fine of £300 and a penalty of up to £60 per day after the initial fine has been issued until you supply HMRC with the required notification. 

Applying for Fixed and Individual Protection 2016 

HMRC has introduced an online service for you to protect your pension lifetime allowance ( by applying for IP2016 or FP2016. There is no application deadline for IP2016 or FP2016. To apply for IP2016, you will need to inform HMRC of the value of your pension savings on 5 April 2016 and your pension administrator was only obliged to provide you with this information up to 5 April 2020. You must apply before you take your retirement benefits as you will need to provide the HMRC reference number to your pension administrator if you want to rely on the protection. Once you have successfully applied for protection, the online service will provide you with a reference number which you will need to keep.

Other protections 

The lifetime allowance was introduced in 2006 and was reduced in 2012, 2014 and again in 2016. Each time the lifetime allowance reduced, if you had already planned your pension savings on the basis of the higher lifetime allowance you could protect your pension savings by applying to HMRC. If you have applied for a previous protection such as enhanced protection, primary protection, fixed protection 2012, individual protection 2014 or fixed protection 2014 you should have received a certificate to confirm your protection.   

However, you may still be subject to the lifetime allowance charge if you lose this protection. 

You can find more information about Tax on your private pension contributions (, these protections and when they may be lost on the Government’s website. 

Taking a tax-free lump sum

The maximum tax-free lump sum you can have when you take your LGPS (NI) pension is the lowest of the following: 

  • 25% of the capital value of your LGPS (NI) benefits, or  
  • 25% of the lifetime allowance which, for those with F P2016, is £312,500 (i.e. 25% of your lifetime allowance of £1.25 million), or 
  • 25% of your remaining lifetime allowance if you have previously taken payment of (crystallised) pension benefits as you will have already used up some of your lifetime allowance.

I think I might be affected – what should I do?

Before considering any action to reduce your tax liabilities, you should always seek independent financial advice from a Financial Conduct Authority registered adviser. For help in choosing an independent financial adviser visit the MoneyHelper website.  

You may also wish to consider:  

  • Converting annual pension for lump sum at retirement can reduce the capital value of your pension benefits. 
  • If you wish to slow down your pension build up, the 50/50 section of the LGPS (NI) allows you to pay half your normal contributions and build up half your normal pension while retaining full life and ill health cover. 
  • If you opt out of the LGPS (NI) with the right to a deferred benefit, you will not be able to combine those benefits with your new pension account if you re-join the LGPS.  

If you have any questions about your LGPS membership or benefits, please contact us.

More information

This section provides an overview of the LTA rules at April 2023. It should not be treated as a complete and authoritative statement of the law. The rules governing LTA can be complex and are subject to change. If you are unsure how to proceed, you are advised to obtain specialist independent financial advice. 

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