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Lifetime Allowance

The Standard Lifetime Allowance (LTA) reduced down to £1.0 million from £1.25 million from 6th April 2016. This represented a reduction of £250,000 from the previous LTA of £1.25 million and a reduction of £800,000 from 2012.


The Lifetime Allowance is tested by multiplying the NHS Pension by 20 and adding any lump sum plus the value of any additional private pensions if drawn at the same time.

From 6 April 2018 the lifetime allowance will also be "indexed" annually to protect against inflation. This means it will rise each year in line with the consumer prices index (CPI) rate of inflation.

The government says that over 96% of people currently approaching retirement have a pension pot worth less than £1m, so this change will affect only the wealthiest pension savers.

For those it does affect, and that will be most senior Healthcare Professionals, transitional protection will be made available for pensions already over £1m alongside the reduction to ensure the change is not retrospective.

The LTA is the total amount of tax privileged pension savings that you are allowed to accumulate within registered pension schemes. Once benefits are taken that exceed the LTA then a tax charge is levied. The tax charge is 55% if the excess if taken as an immediate lump sum. If the excess pension savings are used to provide pension income then the tax charge is reduced to 25%, although it should be borne in mind that the pension income will then be subject to tax at your marginal rate.

If personal pensions are accessed after you have used up the annual allowance from your NHS pension, currently the tax charge is 55% on all funds withdrawn.

We can help you understand your options and protections available


Managing the Lifetime Allowance (+) Click to open

It is important to plan ahead in order to manage the potential impact on your pension savings from the Lifetime Allowance. This applies equally if you are subject to the standard lifetime allowance or have a higher personal allowance due to eligibility for; primary, enhanced or fixed protection. Whilst it may not necessarily be a complete disadvantage to incur a Lifetime Allowance tax charge, it would generally be preferable to avoid such a charge if at all possible.

The simplest way to manage the Lifetime Allowance is to regularly monitor the level of your pension savings and the growth achieved on these savings. In respect of the final salary occupational pension schemes it is important to monitor future changes in pensionable earnings, as they are likely to be key consideration for management of the Lifetime Allowance.

Where it is highly likely that your projected pensions savings will exceed the Lifetime Allowance available at your normal retirement age, then certain decisions can be made to minimise the resulting tax charge.

We will help you plan a retirement strategy that is bespoke to you, there is no "one size fits all solution"

How we can help (+) Click to open

How we can help

Your retirement planning strategy is not just about how much money you will receive your Pension scheme but about your personal goals and family circumstances.

There is no "one size fits all solution" to retirement planning as your circumstances will be different to your friends and the colleagues you work with.

You may wish to consider part time work after 24 hour retirement or you might wish to completely retire in two years’ time or tomorrow! Whatever your plans are for retirement our experienced specialist advisers could help you to plan your retirement strategy.

What we do

We will meet with you for an initial consultation (at our expense) where we have a conversation about your goals and objectives.

We would complete a questionnaire gathering details of your current salary, along with details of any financial planning that you may have in place.

At that stage if you are happy to engage with us to look holistically at your financial position and provide you with a retirement strategy which will enable you to make informed decisions, we would then agree a fee for the work involved.

We would obtain a Pension statement from your pension provider on your behalf if you do not have a recent statement as this provides a fairly accurate picture of your current benefits.

Once we are aware of your current benefits we then create a report which will look at:-

  • Your current financial position

  • Your likely pension at normal retirement age

  • The implications of the Annual Allowance Tax Charge

  • Whether there will be a potential Lifetime Allowance Tax Charge

  • Deferred membership options

  • Early retirement options

  • Strategies to avoid potential tax charges

  • Recommendations and advice on existing financial plans

    It may be beneficial for you to talk to an expert who will help you plan effectively for your retirement.

  • Do you really want to be working until age 68?

    If you are interested in taking advantage of this service please contact us