If the value of your pensions is close to £1,030,000, or are likely to reach this by the time you retire, then you need to know about the lifetime allowance (LTA). The LTA is set by the government and limits the total amount you can build up in pension benefits over your lifetime while still enjoying the full tax benefits. If you go over the allowance you will generally pay a tax charge on the excess when you take a lump sum or income from your pension pot, transfer overseas or reach age 75 with unused pension benefits. Any excess may be subject to tax charges of:
This limit applies to the value of all your pension arrangements. This includes:
If you’re getting close to the pension lifetime allowance, there are things you can do to safeguard your money. These are known as ‘protection’ and they effectively give you your own lifetime allowance, but there are restrictions as well.
The value of investments can go down as well as up so you may get back less than you invest. The value of tax savings and eligibility to invest in an ISA depend on personal circumstances. All tax rules may change in future. Pension money cannot usually be withdrawn until age 55.
Close to retirement but unsure about the options and pitfalls ahead? We can offer guidance and advice to help you find the best solution for your retirement.
Call us on 0800 368 6882, Monday to Friday, 9am - 5pm.
The government’s Pension Wise service offers free, impartial guidance to help you understand your options at retirement. You can access the guidance online or over the telephone on 0800 138 3944.
This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.