What is the lifetime allowance?
The lifetime allowance is a limit on the total value of pension savings you can have across all your pension schemes without a tax charge applying when you take your benefits.
How it works
If your pension savings are worth more than the lifetime allowance you'll have to pay an additional tax charge when you withdraw them. The tax charge is only applied to any excess savings that are over the lifetime allowance. The rate of tax will depend on how the money is paid to you:
- 55% if you take it as a lump sum, or
- 25% if you take it any other way, eg pension or income payments
Visit HMRC to find out more.