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A number of years ago I was able to lock in my pension lifetime allowance (LTA) at £1.5mn. The quid pro quo was that I would not be able to invest any more money into my pension. I have since retired, started taking a pension and used up about 94 per cent of my LTA. I have additional pension fund assets which would take me over the £1.5mn mark.
Now that the LTA has been abolished, does my tax-free lump sum remain at 25 per cent of £1.5mn, or is it set at the current lower limit of £268,275? Can I crystallise my pension assets above £1.5mn without tax charges? And most importantly, can I start investing in my pension pot again?
Peter
Nicola Crosbie, chartered financial planner at Moran Wealth Management, says:
Before 6 April 2024, pension savings were subject to a lifetime allowance (LTA) of £1,073,100. This restricted the amount you could build up in your pension over your lifetime while receiving full tax benefits. Anything in excess was subject to a lifetime allowance charge, the rate of which depended on how the benefits were drawn: 55 per cent applied if you took the excess as a lump sum, 25 per cent if you took it as taxable pension income. The LTA charge was removed from April 2023 and the LTA was officially abolished a year later.