Lifetime Allowance (LTA)
Lifetime Allowance (LTA) is the limit on the amount of pension benefits you can take from all your registered pension arrangements. If you exceed the LTA, you may incur a tax charge.
Lifetime Allowance (LTA) is the limit on the amount of pension benefits you can take from all your registered pension arrangements. If you exceed the LTA, you may incur a tax charge.
This page is designed to help you mange the Lifetime Allowance.
To calculate your LTA, follow these steps:
If the final percentage exceeds 100%, your benefits have breached the current standard LTA limit.
So, for a member with a pension of £60,000 pa and a lump sum of £250,000, their LTA value would be 135.12% of the current standard LTA:
The table below provides examples of when an LTA breach could occur.
The examples are based on the standard LTA.
If you have other pension scheme benefits, the amount of Civil Service pension benefits that could cause you to exceed the LTA would be lower.
Scheme |
Benefits at retirement |
| classic |
Pension per annum of £46,656.52 |
| classic plus | Between £46,656.52 and £53,655.00 pension per annum plus any automatic lump sum |
| premium, nuvos, alpha | Pension per annum of £53,655.00 (if taking no lump sum) |
If you retire having breached the LTA, you will receive a tax charge of 25%. We will permanently reduce your pension to pay this tax charge. If you wish, you can ask for your lump sum to be reduced instead.
This tax charge (known as the Recovery charge) is paid to HM Revenue & Customs (HMRC).
Full details of LTA tax charges are covered in HMRC’s Pensions Tax Manual on the GOV.UK website.
The example below is based on the following scenario.
|
After the lump sum, the available LTA = £823,100 |
(£1,073,100 - £250,000) |
|
Maximum pension up to the LTA = £41,155 |
(£823,100 / 20) |
|
Excess pension = £18,845 |
(£60,000 - £41,155) |
|
Chargeable amount = £376,900 |
(£18,845 x 20) |
|
Recovery charge (RC) = £94,225 |
(£376,900 x 25%) |
|
Pension equivalent of RC = £4,730.17 |
(£94,225 / 19.92*) |
|
Residual excess pension = £14,114.83 |
(£18,845 - £4,730.17) |
|
Full residual pension = £55,269.83 |
(£41,155 + £14,114.83) |
*Actuarial factor based on age
With a recovery charge paid by the scheme of £94,225, the benefits payable would be an annual pension of £55,269.83 and a lump sum of £250,000.
Note that the LTA percentage is based on the value before any reduction for the recovery charge:
These benefits represent 135.12% of the standard LTA.
The reduction could be made against the lump sum instead:
|
LTA value of potential benefits = £1,450,000 |
([20 x £60,000] + £250,000) |
|
Chargeable amount = £376,900 |
(£1,450,000 - £1,073,100) |
|
Recovery Charge = £207,295 |
(£376,900 x 55%) |
|
Lump sum payable = £42,705 |
(£250,000 - £207,295) |
With a recovery charge paid by the scheme of £207,295, the benefits payable would be an annual pension of £60,000 and a lump sum of £42,705.
The LTA percentage would still be 135.12% of the standard LTA.
The actuarial factors for converting the recovery charge into a pension equivalent are available on the dedicated actuarial factors page.
When you retire, we will issue you with a retirement quotation, which will include a Personal Details Form.
Once you have returned this form with details of any other benefits and any LTA protection you may have, we will perform the above calculation and send further options to you.
If you are a Civil Service employer, specialist Lifetime Allowance training is available.