Pensions lifetime allowance explained

Is there a pension lifetime allowance in 2025-26?

No. The lifetime allowance was a limit on the amount you could save into pensions during your lifetime and still receive tax relief.

But in 2023, the government announced that it would abolish the lifetime allowance. 

In the 2022-23 tax year, the lifetime allowance stood at £1,073,100. At its highest level (2011-2012), it was worth £1.8m.

What was the pension lifetime allowance charge?

Until April 2023, you could save as much as you wanted in your pensions, but if your pots exceeded a certain amount, you could be hit with a hefty tax bill – as much as 55%. 

Previous reductions in the lifetime allowance - as well as the annual allowance - had been blamed for higher earners (in particular, senior NHS doctors) retiring early to avoid being hit by large tax bills. 

Make your money go further

Find the best deals, avoid scams, and grow your savings with our expert guidance. From only £4.99 a month.

Join Which? Money

Cancel anytime.

What is the lump sum allowance?

The lump sum allowance is a limit on the amount you can take as a tax-free lump sum from your pensions.

It was introduced on 6 April 2024 and is currently worth £268, 275.

Any amount you take above that limit will be subject to tax.

Am I entitled to a higher lump sum allowance?

The maximum you can take as a tax-free lump sum may be higher than £268,275 if you've previously registered for lifetime allowance protection with HMRC.

This shields your pension against reductions in the lifetime allowance: if your pension savings were more than the new lower allowance, you'd still be able to take advantage of the previous higher allowance.

Depending on the type of protection you have, you could be entitled to take a tax-free lump sum of up to £450,000, rather than the standard limit of £268,275.

You can check or amend your pension lifetime allowance protection through the government's website.