Member Benefits

Lifetime Allowance

The Lifetime Allowance is the total amount of tax-privileged pension benefits that anyone can have. When you take your benefits, all of your pension funds are measured against the Lifetime Allowance. Any funds in excess of the limit on crystallisation will be subject to a tax charge of:

  • 25% of the excess (in addition to income tax) if it is taken as income, or
  • 55% of the excess if it is taken as a lump sum.

The Lifetime Allowance for the 2007/08 tax year is £1,600,000. The Government has set the Lifetime Allowance for the next three years as follows:

Tax YearLifetime Allowance
2008/2009£1,650,000
2009/2010£1,750,000
2010/2011£1,800,000

Any future increases will be announced by Treasury Order.

The new limits will automatically apply, however you are able to protect pension funds built up before A Day as follows:

Primary Protection

If your funds exceed the Lifetime Allowance on A Day then you can register that value with HM Revenue & Customs. Primary Protection will protect funds up to this registered value and the registered value will be increased each year in line with the increases in the Lifetime Allowance.

When you take your benefits, any funds in excess of the indexed registered value will be subject to the recovery charge. Contributions to the scheme can continue.

Enhanced Protection

You can claim enhanced protection whether or not your total pension funds exceeded £1,500,000 on 5th April 2006. If you register for enhanced protection then your entire fund will be protected from any Lifetime Allowance charge, providing no further pension contributions are made to any pension schemes after 5th April 2006.