Abolishing the lifetime allowance

The measure

The Autumn Statement has confirmed that the lifetime allowance and associated reporting regime will be abolished from 6 April 2024. In its place there will be two new allowances: one which will limit the maximum amount a member can receive in the form of various tax-free lump sums during their lifetime, and one which limits the total amount of tax-free death benefits. The new allowances will limit the tax-free amounts available via these two routes to the same levels as currently apply under the lifetime allowance regime. 

The details of the measure will be confirmed in the Autumn Finance Bill, but the policy paper published on 22 November sets out the intention that individuals with lifetime allowance protections which currently entitle them to higher tax-free lump sums or death benefits will retain those rights to higher tax-free amounts. 

There will be transitional provisions set out in legislation to calculate what proportion of the new allowances will be deemed to have been used up by an individual where they have accessed any pension benefits before 6 April 2024. 

Transfers from a registered pension scheme to a Qualifying Recognised Overseas Pension Scheme will be subject to a further new allowance, again set at the same level as the current lifetime allowance, above which any transfer will be subject to the Overseas Transfer charge at 25%. 

A revised reporting regime will also be introduced for pension providers from 6 April 2024 who will have to supply different information to HMRC in relation to pension benefits they provide from that date onwards..  

Who will be affected?

Individuals with pension savings in registered pension schemes in excess of the old Lifetime Allowance (£1,073,100) are likely to be affected by the changes, depending when and in what form benefits are drawn. 

When will the measure come into effect?

The law will take effect from 6 April 2024.