The Lifetime Allowance (LTA) was abolished on 6 April 2024. At the same time, three new allowances were introduced, limiting the amount of pension savings you (and your beneficiaries) can access before a tax charge becomes payable.

What was the Lifetime Allowance?

The LTA was defined as: the total amount of pension savings you could build up in your lifetime before you needed to pay additional tax. If all your pension savings and benefits together were worth more than £1,073,100 (2023/24 tax year) and unless you had a form of protection granted by HMRC (see below), you previously would have paid tax on the amount above the limit.

On 6 April 2024, the LTA was abolished.

What are the new allowances called and what do they mean?

Following the abolition of the LTA, the government has introduced three new tax allowances to limit the amount you can access from your pension savings before a tax charge becomes payable:

• 1. The Lump Sum Allowance (LSA)

  When you access part or all of your pension savings as a cash lump sum, up to 25% is usually tax free unless it’s more than the current LSA of £268,275. Any amount over the LSA will be taxed at your marginal rate.

• 2. The Lump Sum and Death Benefits Allowance (LSDBA)

  The LSDBA is the maximum tax-free lump sums that you and your beneficiaries can receive from your pension savings. The total value that can be paid as a tax-free lump sum is £1,073,100.

  If your pension savings are higher than the LSDBA, you or your beneficiaries will usually pay tax on anything above the limit.

• 3. The Overseas Transfer Allowance (OTA)

  If you're living overseas or have plans to move abroad, you have the option to either leave your benefits and savings in the Scheme or you may be able to transfer out to a Qualifying Recognised Overseas Pension Scheme (QROPS). A QROPS is an overseas pension scheme that HMRC regards as eligible for transfer from pension schemes registered in the UK.

  The OTA is £1,073,100 for the current tax year 2024/25. You'll pay a 25% tax charge on the excess amount if you transfer more than this allowance to a QROPS.

Want to find out more about the new allowances?

Further information on the LSA and LSDBA can be found on the Tax-free lump sum allowances page of the MoneyHelper website.

For additional details about the OTA, you can visit the Moving a UK pension overseas page of the MoneyHelper website.

What are HMRC protections?

Since the LTA was introduced in 2006, those with significant pension savings have been able to register for HMRC protections to potentially obtain a higher LTA. Following the abolition of the LTA, you're now able to start building up your pension savings again without being at risk of losing your protection, including any entitlement to a tax-free cash amount in excess of the LSA.

More information about the different protections, including a link to check any existing protection you may have, is available on the gov.uk website. If you have HMRC protections in place, your LSA, LSDBA and OTA may be higher.

Does this mean I don’t need to pay any tax on the amount I contribute?

While the LTA no longer exists, there's still a limit on how much you can save tax free in any given year. This is called the Annual Allowance (AA).

From 6 April 2023, the AA rose for most individuals from £40,000 to £60,000 (or your total earnings in the tax year, if lower)*, so you can save more tax free each year if it’s right for you and your circumstances.

^{*For higher earners, the AA may be reduced or tapered down to £10,000. In addition, individuals who have accessed some or all of their pension savings through an uncrystallised funds pension lump sum, or using drawdown, will be subject to the Money Purchase Annual Allowance of £10,000.}

Need financial advice?

If you need help understanding how these tax allowances apply to you, we recommend you get financial advice from an FCA-regulated financial adviser who is authorised to advise on tax matters. Use unbiased.co.uk to find a financial adviser near you.

If you’ve not yet taken your benefits from the Plan, don’t worry. You can get advice from Origen Financial Services (Origen), a firm of financial advisers that is regulated by the Financial Conduct Authority (FCA), which has been appointed by the Trustee of The Bank of New York Pension Plan and The Bank of New York Mellon for you to access at preferential rates.

To find out more about Origen, call: 0800 092 8006*. Lines are open 8.30am - 5.30pm, Monday to Friday, or email: BNYMellonPP@origenfs.co.uk

^{*All calls are recorded for business purposes. Calls are free from landlines & from mobiles if calling from within the UK.}