Frequently Asked Questions
What is the “lifetime allowance”?
This is the principal mechanism by which HMRC limits the tax privileges available to an individual with "excessive" pension savings. Each time new benefits are taken, a portion of your lifetime allowance is used up.
The lifetime allowance for tax-privileged pension savings is:
| Tax Year | Allowance |
|---|---|
| 2006/07 | £1.5m |
| 2007/08 | £1.6m |
| 2008/09 | £1.65m |
| 2009/10 | £1.75m |
| 2010/11 | £1.8m |
Pension savings in excess of the lifetime allowance are subject to a 25% tax charge if taken as a taxable pension or a 55% tax charge if taken as a lump sum. Transitional protection against these tax charges is available if you had large pension savings at A-Day.