The abolition of the pension Lifetime Allowance (LTA) is one of the most significant changes to the pension landscape in recent years.

Initially announced during Chancellor Jeremy Hunt’s 2023 Spring Budget, the move was designed to encourage high earners and senior workers in the later stages of their careers to continue working and contributing to their pots.

The LTA last stood at £1,073,100, and placed a lifetime limit on total tax-efficient pension savings. If the combined value of your pensions exceeded this threshold, you’d have faced a tax charge when you came to withdraw your funds. This charge was:


  • 55% on lump sum withdrawals
  • 25% on money taken as income, on top of your marginal rate of Income Tax.


The chancellor removed this charge from April 2023, with the full abolition of the limit to take place in April 2024, where we are now.

However, while removing the charge took just two pages of legislation, it took over 100 to entirely abolish the LTA itself.

Read on to discover what will change from 6 April when the LTA is officially abolished, and what it might mean for you moving forward.

The LTA is to be replaced with 3 new pension allowances

To replace the former cap on the total amount you could tax-efficiently save into your pension during your lifetime, there will be three new allowances that predominantly control the size of lump sums from your pension in various circumstances.

Below are details of the new pension allowances that will replace the LTA:


  • Lump Sum Allowance (LSA) – The LSA is the limit on tax-free lump sums you can take from your pensions during your lifetime, including pension commencement lump sums as well as the tax-free portion of an uncrystallised pension lump sum. It stands at £268,275, 25% of the previous LTA threshold.
  • Lump Sum and Death Benefit Allowance (LSDBA) – The LSDBA places a limit on tax-free lump sums and the tax-free part of lump sums payable on your death, applying to both lump sums paid during your lifetime, and on death. It stands at £1,073,100, the same as the LTA threshold at last count.
  • Overseas Transfer Allowance (OTA) – The OTA applies to transfers to a qualifying recognised overseas pension scheme (QROPS). It also will stand at the previous LTA limit of £1,073,100.


It’s worth bearing in mind that your allowances may be higher if you previously applied for LTA protection. This may have seen you fix your threshold at a higher amount as a result of the LTA being reduced in a subsequent tax year.

In this case, your LSA will be 25% of whatever your LTA was previously protected at, while your LSDBA and OTA will stand at 100% of this figure.

There will also be transitional arrangements if you have started to draw some of your pension benefits already, depending on what you have withdrawn and how much of your LTA you have used.

As these are complex calculations, it can be sensible to seek professional advice.

You might want to consider contributing more to your fund

Now that the LTA itself is no longer a concern for tax-efficient pension saving, you may be wondering what this means for you.

Primarily, this change might encourage you to contribute more to your pension than you might have if you were concerned about exceeding the LTA. A tax charge of 55% on lump sums or 25% on income alongside your marginal rate of Income Tax is certainly a hefty deterrent if you want to enjoy your retirement savings as much as possible.

So, if you had been holding off on pension saving to avoid a charge like this, you may now feel confident in contributing more to your fund than before.

Similarly, you might now consider delaying your retirement, or returning to work if you had already retired. Part of the reason that the government decided to remove the LTA was to incentivise high earners and those in senior positions to remain in work by offering this ability to tax-efficiently save more into your retirement pot.

As a result, you might want to reassess your retirement plans and see whether working for longer than you initially thought you might could help you reach your goals even more effectively.

That said, it’s worth thinking about the potential drawbacks before you make any decisions, either about your pension or the longevity of your career.

For one thing, you usually won’t be able to access your pot before you reach the normal minimum pension age (currently 55, rising to 57 by 2028).

As a result, if you’re not yet at this age and have goals you want to reach in the shorter term, you may want to consider holding your savings somewhere more accessible.

Furthermore, it’s worth thinking about how you’ll access your pension when you do. For example, although the LTA has been removed, the newly introduced LSA will still limit how much of your fund you can take as a tax-free lump sum to 25% of the previous LTA limit.

So, even though you can tax-efficiently save more into your pot, there will still be tax considerations for withdrawals.

The abolition of the LTA shows the importance of consistently taking financial advice

Although the removal of the LTA is designed to encourage greater savings, the changes show the importance of consistently taking financial advice from a professional.

By working with a financial planner, you can be best positioned to take advantage of legislative changes like this and adapt quickly to ensure that your wealth is still suitably organised for reaching your life goals.

Additionally, it’s worth bearing in mind that there could be further refinements down the line as the new legislation takes effect. Indeed, pension providers and savers might identify teething problems with the new rules, and the LTA could also be reintroduced in future.

In fact, Labour may reimplement the threshold again if the party wins the next election, the Telegraph reports, although high-earning public sector workers may be protected if this were to happen.

So, it’s important to stay up to date with what’s going on to ensure that you remain within the rules when saving or withdrawing from your pension.

If you’d like to work with a professional who can help you navigate the abolition of the LTA and more, please do get in touch with us at Cordiner Wealth.

Email or call 0113 262 1242 to speak to an experienced adviser today.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.