In April 2024, the lifetime allowance was removed and replaced by the lump sum allowance. The lump sum allowance is a limit on how much money you can withdraw as a lump sum from UK pensions without paying extra tax. If the total of all your lump sums goes over this limit, you’ll need to pay additional tax.
Lump sum allowance limit
The lump sum allowance is either £268,275 or 25 per cent of the value of your pension benefits, whichever is lower. Most people will not be affected because their lump sums will usually be much smaller than this limit. However, if you have a large pension in the Local Government Pension Scheme (LGPS) or another scheme, these limits could apply to you.
What happens when you retire?
When you retire and take a lump sum, we’ll check how much of your lump sum allowance you’ve used. If you’ve already taken a lump sum from the LGPS or another UK pension scheme, this will have reduced your available allowance, and we’ll ask you for details. You can find more information about this on our webpage ‘The current pension tax limits.’
If you’ve already taken your pension
If you’ve already received your pension, your P60 certificate will show how much of your lump sum allowance you’ve used (instead of the percentage of lifetime allowance). For more details, visit our webpage ‘Your P60 certificate.’