The end of the pensions savings lifetime allowance

On April 6 2024 the lifetime allowance charge was abolished, this was the limit on the amount you could build up in pensions savings without triggering a tax charge and was set at £1,073,100.

Although the abolition of the allowance will only benefit a small percentage of the population, it’s still important to understand the changes and if they could impact your retirement plans.

The lifetime allowance has been replaced by the lump sum allowance (£268,275) and the lump sum and death benefit allowance (£1,073,100) – both these allowances limit the amount of tax-free benefits that can be paid and a check is made against each of them when benefits are paid.

The changes make pensions an even more attractive way of saving for retirement as you no longer have to worry about your pension becoming too large.

However, there is still a limit on the amount you can save into pensions each year without paying tax. This is known as the ‘annual allowance’ and is currently £60,000 or 100 per cent of your salary, whichever is lower.

It’s also important to remember that any money you save into a pension will be locked away until retirement age and if you feel you may need to access the money before then, another option such as an individual savings account (ISA) could be a better choice.

If you think any of the changes could impact your retirement plans or you would like to discuss your personal circumstances in more detail, please get in touch.