Major changes to tax legislation affecting retirement savings and pensions came into force on 6 April 2024. The Lifetime Allowance (LTA), a limit on the amount of tax-free retirement savings you could build up, was replaced by the Lump Sum Allowance (LSA). Find out more about this below.

Previously, there were two limits that restricted the amount of tax-free retirement saving you could make. The Annual Allowance (AA), which allowed you make up to £60,000 of tax-free retirement savings in every tax year, and the Lifetime Allowance, which imposed a tax charge if your overall retirement savings were greater than £1,073,100 at retirement.

While the AA remains, the LTA and the associated tax charge were abolished on 6 April 2024.

In its place, the Government has introduced a restriction on the amount of tax-free cash you can take in your lifetime. This is set at £268,275.

If eligible, you can take a tax-free cash lump sum from one or more scheme that you're a member of, but at the point where these lump sums add up to more than £268,275, you may find that you can't take any more. And if you can, you'll have to pay tax on any lump sum you receive that's in excess of your LSA.

When you retire from our scheme, we ask you to provide details of any pensions and tax-free cash lump sums that you've already received. If the tax-free lump sum from our scheme is greater than your remaining LSA, we'll restrict the amount of cash you can have, converting it into annual pension income instead.

This legislation change was introduced very quickly by the Government and many aspects of the legislation were not settled until a few days before it became law.

This means that when you take retirement benefits, all schemes will be asking you to provide more information about any pensions and tax-free lump sums that you've already received. So before you retire from our scheme, make sure that you have details of any LTA and LSA that you've already used. If you don't have this information to hand, please request it from your pension provider, as we won't be able to start paying your pension until we've seen a copy of it.

You can find out more detail about the LSA by reading our Lump Sum Allowance factsheet, which can be found in the Guides and Scheme Documents section of the website.