Member Benefits

Lifetime Allowance

The Lifetime Allowance is the total amount of tax-privileged pension benefits that anyone can have. When benefits are taken, all of the member’s 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 members will be able to protect pension funds built up before A Day as follows:

Primary Protection

Members whose funds exceed the Lifetime Allowance on A Day can register that value. 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 the member takes their 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

Any member can register for enhanced protection, providing they are not over-funded.

The entire fund will be protected from any Lifetime Allowance charge, providing no further pension contributions are made post A Day.

Tax-Free Cash Protection

Where a member has entitlement to tax free cash of more than 25% of the fund, or more than 25% of the Lifetime Allowance on A Day (ie £375,000), then transitional arrangements are available to protect this as well.