Lifetime allowance

The lifetime allowance is the total capital value of all your pension arrangements, but not your state pension, which you can build up without paying extra tax.

If the value of your benefits when you draw them (not including any state retirement pension, state pension credit or any spouse’s, civil partner’s or dependant’s pension you may be entitled to) exceed your lifetime allowance, or your primary lifetime allowance protection or enhanced protection if you have opted for it, a tax charge will be made against the excess.

The lifetime allowance for 2010/2011 is £1.8million.

The lifetime allowance covers any pension benefits you may have in all tax-registered pension arrangements – not just the LGPS. Most scheme members pension savings will be significantly less than the lifetime allowance.

There are protections for benefits earned up to 5 April 2006 in respect of those high earners affected by the introduction of the lifetime allowance from 6 April 2006.