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2024 General Election

Labour drops Lifetime Allowance reintroduction – what you need to know

Labour’s promise to reintroduce the Lifetime Allowance to pensions has been dropped in their manifesto. We look at what you need to know.
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Important information - This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

After months of speculation, it looks like the lifetime allowance (LTA) saga has finally run its course. Labour recently announced ahead of launching its manifesto that it will now drop plans to reintroduce the LTA – a sigh of relief for those approaching retirement.

Here’s what you need to know about the lifetime and pension allowances.

This article isn’t personal advice. If you’re not sure what’s right for you, ask for financial advice.

Pension and tax rules can change, and any benefit depends on individual circumstances. Remember, you can’t usually take money out of a pension until at least age 55 (rising to 57 from 2028).

Helen Morrissey, Head of Retirement Analysis, discusses the potential future for the Lifetime Allowance.
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What was the pension lifetime allowance?

The lifetime allowance was a cap on the total value of pension benefits you could take, set at £1,073,100.

Exceeding this limit meant paying a tax charge on any amount over it. However, from 6 April 2023, the LTA was abolished by Chancellor Jeremy Hunt and replaced with three new allowances from 6 April 2024:


Lump sum allowance

This applies to the tax-free element of certain lump sums, capped at £268,275. Amounts exceeding this allowance are taxed at your marginal rate.


Lump sum and death benefit allowance

This applies to the tax-free element of lump sum payments and non-taxable lump sum death benefits, up to a value of £1,073,100.


Overseas transfer allowance

Lastly this applies to pensions transferred overseas to a Qualifying Recognised Overseas Pension Scheme (QROPS), also capped at £1,073,100.

What are your other allowances?

The main allowance is the pension annual allowance and it currently stands at £60,000.

This is the maximum amount you can contribute to your pensions each tax year without triggering a tax charge.

Pension contributions include those made by you, your employer, or anyone else. Plus you can get basic-rate tax relief added by the government.

For high earners, lower limits might apply.

If you’re a higher earner, you might have a tapered annual allowance. This is where your annual allowance will be reduced based on your earnings.

Example: If your threshold income exceeds £200,000 and adjusted income surpasses £260,000, your annual allowance will decrease by £1 for every £2 of adjusted income over £260,000, down to a minimum of £10,000.

Not sure what this all means for you and your pension?

Book a call with our advisory team

If you think you could benefit from getting expert financial advice from a professional, contact our advisory team today.

You won't get personal advice on the call, but they'll talk you through the advice service we offer, including charges and connect you with an adviser if you'd like to go ahead.

Our advisers can recommend how you can make the most of your tax allowances through financial planning but if you need complex tax calculations, your adviser may recommend that you speak to an accountant to complement their advice.

3 strategies to maximise your pension benefits

Alongside using your own annual allowance, here’s 3 strategies to help boost your retirement.


Use carry forward

If you risk exceeding your annual allowance, you might be able to use unused allowances from the previous three tax years, potentially allowing contributions up to £200,000 in one year.


Monitor contributions

Keep track of all your pension contributions, including those from your employer and tax relief, to avoid unexpected tax charges.


Consider spousal or child contributions

Contributing to a spouse or partner’s pension can maximise tax efficiency and utilise their annual allowance.

You can contribute to the pension of a non-earning spouse, partner, or child up to £2,880 annually.

Basic rate tax relief will then be added afterwards.

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Written by
Helen Morrissey
Head of Retirement Analysis

Helen raises awareness of key retirement issues to help people build their resilience as they move towards their later life.

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Article history
Published: 13th June 2024