GOOD NEWS! INCREASE TO STANDARD LIFETIME ALLOWANCE (LTA)
The standard Lifetime Allowance is to be increased from 6 April this year (2018). Further details: [private]
The current standard Lifetime Allowance (LTA) is £1 million. From 6 April 2018 it will be increased to £1,030,000. This increase could save those subject to the standard LTA up to £16,500 in tax charges when they retire.
The LTA is the maximum amount of pension savings/benefits you can have in your pension pot without incurring an additional income tax charge.
Pension savings and benefits are counted from all sources other than the national state pension. If the value of your pension benefits when you draw them is more than the LTA, or more than any LTA protections you may have, you will have to pay tax on the excess benefits.
The standard LTA is the limit that applies to all UK taxpayers unless they have additional special protection (such as Enhanced, Fixed or Individual Protection) which gives them a higher personal LTA level. If you have additional special protection the value of which is higher than £1,030,000 then that special protection will continue to apply to you after 6 April 2018. If your special protection is for less than £1,030,000 then the new, higher, standard LTA will apply to you.
To get a rough estimate of the value of your pension pot for LTA purposes you multiply your ‘earned’ pension from all sources (other than the state pension) by 20 and add on any ‘earned’ lump sum to which you are entitled.
More details about how the LTA works can be found in Appendix 1 to the “Pensions: Frequently Asked Questions (FAQs)” document in the confidential Members’ Zone of the ALACE website. [/private]