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Pension Lifetime Allowance

Pension Lifetime Allowance

Are you living abroad as an expat but have a pension that has reached the lifetime allowance? Do you have options available for further growth on your pension? Have you secured a Lifetime Allowance?

What You Need to Know

The Lifetime Allowance is the maximum pensions savings you can build up without a tax charge over your lifetime. It is currently £1.25 million but was reduced to £1 million on 6 April 2016. Your pension benefits are tested against the Lifetime Allowance when you start to draw them from the scheme.

It applies to the total of all the pensions you have, including the value of pensions promised through any defined benefit schemes you belong to, but excluding your State Pension.

From 6 April 2018, the government intends to index the standard Lifetime Allowance annually in line with the Consumer Prices Index (CPI).

Lifetime Allowance Charges

If the cumulative value of the payouts from your pension pots, including the value of the pay-outs from any defined benefit schemes, exceeds the Lifetime Allowance, there will b a tax on the excess called the lifetime allowance charge.

The way the charge applies depends on whether you receive the money from your pension as a lump sum or as part of regular retirement income.

Lump sums

Any amount over your allowance that you take as a lump sum is taxed at 55%. Your pension scheme administrator should deduct the tax and pay it over to HMRC, paying the balance to you.


Any amount over the Lifetime Allowance that you take as a regular retirement income, for instance by buying an annuity, attracts a charge of 25%. This is on top of any tax payable on the income in the usual way.

For defined contribution pension schemes, your pension scheme administrator should pay the 25% tax to HMRC out of your pension pot, leaving you with the remaining 75% to use towards your retirement income.

Fixed Lifetime Allowance Protection

Applicable if:

  • your employer or yourself haven’t added to your pension savings since 5 April 2016
  • you opted out of any workplace schemes by 5 April 2016

You can still apply for fixed protection 2016 if you already have individual protection 2014. Fixed protection 2016 will be dormant until you lose your previous protection. You should tell HMRC in writing when you have lost lifetime allowance protection.

You cannot apply if you have:

  • enhanced protection
  • primary protection
  • fixed protection
  • fixed protection 2014

If you applied for protection from the 2016 reduction and received a temporary reference number, you must apply online for a permanent reference number.

What options are available

Speak to one of our advisers or schedule an appointment to understand how we can help you in your retirement. To learn more about financial advice for expats, try our revolutionary online advice service, get started today for free, no obligation, financial analysis and information.

The information contained herein is for informational purposes only which is subject to change and should not be relied upon. You should seek advice from a professional adviser before embarking on any financial planning activity.

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