What is the lifetime allowance?
The lifetime allowance is the total value of all pension benefits you can have without triggering an excess benefits tax charge. If the value of your pension benefits when you draw them (not including any state retirement pension, state pension credit or any partner’s or dependant’s pension you may be 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 is set by HM Treasury and is currently £1,078,400; it covers any pension benefits you may have in all tax-registered pension arrangements – not just the LGPS.
For pensions that start to be drawn on or after 6 April 2006, the value of those pension benefits, for the purposes of the lifetime allowance, is calculated by multiplying your annual pension by 20 and adding any lump sum you draw from the pension scheme (including any lump sum drawn from an in-house AVC fund).
The lifetime allowance quick check tool
You can use the quick check tool to:
- estimate the total value of your LGPS benefits (including an in-house AVC fund)
- estimate how much of the current lifetime allowance your LGPS benefits would use
- check if an excess tax charge is likely to be payable in respect of your LGPS benefits
The check tool does not take into account:
- any pension benefits that are already being paid to you (these are valued differently)
- any pension benefits that you hold with other pension schemes
- any lifetime allowance protection that you may hold
View the Lifetime Allowance Factsheet on the LGPS member website here.
Still want more information? Please feel free to watch the “Your Lifetime Allowance” video courtesy of the LGPSMember.org team below: