The lifetime allowance was removed on 6 April 2024. This doesn’t mean there are no limits on the amount of pension savings people can take without a tax charge; the lifetime allowance is being replaced by new allowances.

The lifetime allowance was replaced with three different allowances:

• the lump sum allowance - £268,275
• the lump sum and death benefit allowance - £1,073,100

Both of these allowances limit the amount of tax-free lump sum that can be paid.

There is also:

• the overseas transfer allowance - £1,073,100

A check is made against these allowances when benefits are paid.

These allowances may be higher if the individual has lifetime allowance protection.

These allowances are reduced if benefits were taken before 5 April 2024.

The lump sum and death benefit allowance is applicable at a relevant benefit crystallisation event, which occurs when an individual dies or receives a serious ill-health lump sum. It's crucial to note that most tax-free benefits received during the individual's lifetime are deducted from this allowance.

After 5 April 2024, a relevant benefit crystallisation event pertains only to the tax-free portion of lump sum benefits received. There are no such events for taxable pension income.

The definition of a relevant benefit crystallisation event varies depending on whether it's associated with the lump sum allowance or the lump sum and death benefit allowance.

Lump Sum Allowance (LSA):
For the lump sum allowance, a relevant benefit crystallisation event for an individual is defined as the individual becoming entitled to either:
- a pension commencement lump sum, or
- an uncrystallised funds pension lump sum.

Lump Sum and Death Benefit Allowance (LSDBA):
For the lump sum and death benefit allowance, a relevant benefit crystallisation event for an individual is defined as:
- the individual becoming entitled to a relevant lump sum, or
- a person receiving a relevant lump sum death benefit concerning the individual.

A relevant lump sum is defined as:
- a pension commencement lump sum,
- a serious ill-health lump sum, or
- an uncrystallised funds pension lump sum.

A relevant lump sum death benefit refers to any authorised tax-free lump sum death benefit, excluding:
- a charity lump sum death benefit, or
- a trivial commutation lump sum death benefit.

The standard lifetime allowance was abolished from 6 April 2024.

When the Lifetime Allowance was introduced, and with each subsequent reduction, individuals had the opportunity to apply for protection against potential Lifetime Allowance charges. Those who applied would have received a certificate from HM Revenue & Customs (HMRC). It's important to note that if you hold what is known as enhanced or primary protection, you will possess only one certificate.

Prior to 6 April 2024, individual protection preserved the lifetime allowance at a specific level based on the type of individual protection held. It now offers a higher lump sum allowance and a lump sum death benefit allowance.

Individual Protection 2016 provides individuals with a protected lump sum and death benefit allowance equivalent to the value of their pension savings as of 5 April 2016, with a maximum limit of £1.25 million.

Pension contributions may continue. Any pension savings exceeding the lump sum allowance and lump sum death benefit allowance are subject to an income tax charge.

The application deadline for Individual and Fixed Protection 2016 is 5 April 2025.

Further information regarding the LSA and LSDBA here