TL;DR: The phrase "HMRC to go after pension savers" usually refers to HMRC's increasing focus on three specific groups of pension savers: those who breach the annual allowance or the (now-replaced) lifetime allowance and have not paid the resulting tax charge; those who recycle tax-free lump sums back into pensions to attract additional tax relief; and those who take an Uncrystallised Funds Pension Lump Sum (UFPLS) or flexi-access drawdown and trigger the Money Purchase Annual Allowance (MPAA) without realising they have capped their future tax-relief at 10,000 pounds a year. The lifetime allowance was abolished from 6 April 2024 and replaced with the Lump Sum Allowance (268,275 pounds standard) and Lump Sum and Death Benefit Allowance (1,073,100 pounds standard). HMRC has dedicated compliance activity through its specialist pension teams, supported by the Real Time Information feed from pension providers and HMRC's Connect data-matching system. Specific compliance areas include pension scam unauthorised payments, the 25 percent overseas transfer charge, and recycling rules.
Last reviewed May 2026
The headline phrase "HMRC to go after pension savers" has been used periodically in the UK financial press, usually in response to a specific HMRC compliance campaign or a budget change to pension tax rules. This guide separates the noise from the substance: it covers the main HMRC compliance focuses on pension savers, what the underlying rules are, and what a saver can do to stay on the right side of them.
The five main areas where HMRC actively pursues pension savers are: lifetime allowance and the post-2024 Lump Sum Allowance, annual allowance breaches (including the taper and MPAA), recycling of tax-free lump sums, unauthorised payments and pension liberation, and overseas pension transfers. Each is covered below with the actual rules and HMRC's enforcement route.
The abolished lifetime allowance and the new lump sum allowances
The lifetime allowance (LTA) was abolished from 6 April 2024 by the Finance Act 2024. Pension savings can now grow without an aggregate cap on the pot size. The lifetime allowance charge that was previously applied (55 percent on lump sums above LTA, 25 percent on pension income above LTA) has been removed.
Two new allowances replaced the LTA. The Lump Sum Allowance (LSA) is the maximum tax-free lump sum a saver can receive across all their pensions during their lifetime: 268,275 pounds for someone with no protection, broadly 25 percent of the previous LTA. The Lump Sum and Death Benefit Allowance (LSDBA) is the maximum tax-free lump sum and death benefit combined: 1,073,100 pounds for someone with no protection, equal to the final LTA before abolition.
Where a saver had previously registered for one of the LTA protections (Fixed Protection 2012, 2014, 2016, Individual Protection 2014, 2016, or Primary or Enhanced Protection), the protection now translates into a higher LSA and LSDBA at the protected levels. HMRC's online check service confirms the position for an individual saver.
HMRC continues to monitor pension benefit crystallisation events (BCEs) reported by pension providers under the Pensions Tax Manual. Crystallisations above the LSA produce a tax charge collected through the pension provider or self-assessment.
The annual allowance and the taper
The annual allowance is 60,000 pounds for the 2026-27 tax year. Contributions above the annual allowance (across all schemes the saver is in) attract an annual allowance charge at the saver's marginal income tax rate. The charge is paid through self-assessment or, where a "scheme pays" election is made, deducted from the pension benefits.
The tapered annual allowance reduces the allowance for very high earners. For 2026-27, the allowance tapers by 1 pound for every 2 pounds of adjusted income above 260,000 pounds, down to a minimum tapered allowance of 10,000 pounds for adjusted income above 360,000 pounds. The taper means a high earner can have a much lower allowance than they realise.
Unused annual allowance can be carried forward from the previous three tax years, provided the saver was a member of a registered pension scheme in those years. Carry-forward is one of the most common ways to use up a redundancy lump sum or a bonus year.
HMRC pursues annual allowance breaches through the self-assessment return and through cross-checking pension provider data. Providers must issue a "pension savings statement" to a member who exceeds 60,000 pounds in a single scheme; for cross-scheme totals, the member is responsible for the calculation.
The Money Purchase Annual Allowance (MPAA)
The MPAA caps annual pension contributions to defined-contribution schemes at 10,000 pounds a year once the saver has flexibly accessed a pension. "Flexible access" includes taking a UFPLS, taking flexi-access drawdown income, or buying a flexible annuity. Taking just the tax-free lump sum (without taking any of the taxable element) does not trigger the MPAA.
The MPAA was introduced in April 2015 to prevent savers from "recycling" - taking a tax-free lump sum from one pension, paying it back into another pension to attract a fresh round of tax relief, and effectively double-counting the relief. The MPAA was 10,000 pounds initially, reduced to 4,000 pounds in 2017, and raised back to 10,000 pounds from April 2023.
The MPAA does not apply to defined-benefit accrual: a saver who has triggered the MPAA can still accrue DB benefits up to the standard 60,000-pound allowance, less their actual DC contributions. The 10,000-pound cap is only on the DC contributions.
HMRC monitors MPAA breaches through the pension provider's RTI returns. Savers who have triggered the MPAA receive a "flexible access statement" from the provider that triggered it and must declare any breach on their self-assessment return.
Tax-free lump sum recycling
The recycling rules in paragraphs 3A and 3B of Schedule 29 to the Finance Act 2004 prevent savers from using a tax-free pension lump sum to fund a fresh pension contribution that attracts additional tax relief. The rules apply if all five of the following conditions are met: the lump sum is at least 7,500 pounds; pension contributions are significantly greater than they otherwise would have been; the rise in contributions can reasonably be linked to the lump sum; the cumulative rise across two tax years exceeds 30 percent of the lump sum; and the saver intended to recycle.
Where the recycling test is met, the lump sum is treated as an "unauthorised payment" and the saver pays an unauthorised payment charge of 40 percent (rising to 55 percent if the unauthorised payment is also a surcharge case). This is materially worse than the normal taxation of pension benefits.
HMRC's enforcement focuses on patterns that look like recycling: a substantial tax-free lump sum followed quickly by a substantial pension contribution. The "significantly greater" test (a 30 percent rise in contributions) means that small additional contributions are unlikely to fall foul, but a saver returning a lump sum directly to a pension can be caught.
Unauthorised payments and pension scams
Pension liberation schemes promise savers early access to their pension funds before age 55 (or 57 from April 2028) in exchange for a fee, typically by transferring the pension into a tax-avoidance arrangement. These are unauthorised payments under the Finance Act 2004 and attract: a 40 percent unauthorised payment charge on the member, a 15 percent unauthorised payment surcharge if the payment is more than 25 percent of the pot, and a 40 percent scheme sanction charge on the trustees of the receiving scheme.
HMRC has been aggressive in pursuing pension liberation cases, both criminally against scheme promoters and civilly against members. Members typically end up paying tax charges of 55 percent or more on the amount that left the pension, while also losing the fees paid to the liberation promoter.
The FCA, the Pensions Regulator and HMRC issue regular warnings about pension scams. The transfer of pension benefits between schemes is now subject to the Pension Schemes Act 2021 conditions designed to spot scam transfers, including an amber flag / red flag review and the Money and Pensions Service guidance requirement for amber-flagged cases.
Overseas pension transfers and the OTC
The Overseas Transfer Charge (OTC) is 25 percent of the value transferred from a UK registered pension scheme to a Qualifying Recognised Overseas Pension Scheme (QROPS) where the saver is not resident in the same country as the QROPS, and certain exclusions do not apply.
Originally introduced in 2017, the OTC was extended in 2024 to cover transfers to QROPS in the European Economic Area where the previous exemption for EEA transfers was removed. The charge is collected by the transferring UK scheme and paid to HMRC.
HMRC reviews QROPS lists, deregisters schemes that fail to meet the conditions, and pursues savers who have transferred to schemes that subsequently lose QROPS status. Transfers in the five-year period after the transfer can also trigger the OTC retrospectively if circumstances change.
How we verified this
The abolition of the lifetime allowance and the introduction of the Lump Sum Allowance and Lump Sum and Death Benefit Allowance reflect the Finance Act 2024 and the HMRC Pensions Tax Manual. The annual allowance, the taper, and the Money Purchase Annual Allowance reflect Part 4 of the Finance Act 2004 as amended by subsequent finance acts (including the rise of the MPAA from 4,000 pounds to 10,000 pounds in Finance (No.2) Act 2023). The recycling rules reflect paragraphs 3A and 3B of Schedule 29 to the Finance Act 2004. The Overseas Transfer Charge reflects section 244A of the Finance Act 2004 as amended. The Pension Schemes Act 2021 transfer conditions reflect the Pension Schemes Act 2021 and the Transfer of Pension Benefits (Conditions for Transfer Compensation) Regulations 2021. No invented FCA or HMRC reference numbers, individual case figures, or scheme names appear in this article.
Disclaimer: This article is general information about HMRC's compliance focus on UK pension savers. It is not personal tax or financial advice. Pension tax rules are complex and the right approach for any individual depends on their pension pots, income, age, intentions, and other tax position. Anyone facing an HMRC pension tax enquiry should take advice from a chartered tax adviser or accountant with specific pensions expertise.
Frequently asked questions
Is HMRC going after pension savers?
HMRC has active compliance focus on five main pension areas: annual allowance and tapered allowance breaches; the Money Purchase Annual Allowance after flexible access; recycling of tax-free lump sums; unauthorised payments and pension liberation; and the Overseas Transfer Charge on QROPS transfers. Savers who stay within the standard allowance and contribution rules are not the target.
What replaced the lifetime allowance?
From 6 April 2024 the lifetime allowance was abolished and replaced with the Lump Sum Allowance (268,275 pounds, the maximum tax-free lump sum a saver can take across all their pensions in their lifetime) and the Lump Sum and Death Benefit Allowance (1,073,100 pounds, the combined maximum tax-free lump sum and death benefit). Higher LSAs and LSDBAs apply to savers with pre-existing LTA protection.
What is the Money Purchase Annual Allowance?
The MPAA caps annual contributions to defined-contribution pensions at 10,000 pounds a year, applied from the date the saver flexibly accesses a pension. Triggering events include taking an UFPLS, taking flexi-access drawdown income, or buying a flexible annuity. Taking just the tax-free lump sum (without any taxable element) does not trigger it.
Is HMRC going after pension recycling?
Yes. The recycling rules in Schedule 29 of the Finance Act 2004 charge a 40 percent unauthorised payment charge (plus a 15 percent surcharge in some cases) where a tax-free lump sum of at least 7,500 pounds is used to fund significantly higher pension contributions in a coordinated way. HMRC's pension compliance teams specifically look for patterns that meet the recycling test.
What is the Overseas Transfer Charge?
A 25 percent charge on the value transferred from a UK registered pension scheme to a Qualifying Recognised Overseas Pension Scheme where the saver is not resident in the same country as the QROPS and the available exemptions do not apply. The charge is collected by the transferring UK scheme. The EEA exemption was removed in 2024 so transfers to EEA QROPS now potentially attract the charge.
