Last reviewed: 30 April 2026 | Sources: HMRC — Abolition of the Lifetime Allowance from 6 April 2024 | Finance Act 2024 | House of Commons Library SN05901 (April 2026)
⚡ TL;DR — Skip to what matters
The pension lifetime allowance (LTA) — which previously capped total pension savings at £1,073,100 — was fully abolished from 6 April 2024 under the Finance Act 2024. You can now accumulate pension savings of any size without a specific tax charge on the fund itself. However, two new allowances cap the amount you can take tax-free as lump sums: the Lump Sum Allowance (£268,275 tax-free cash in your lifetime) and the Lump Sum and Death Benefit Allowance (£1,073,100). All pension income from drawdown and annuities continues to be taxed at your marginal income tax rate — unchanged.
📋 Key Facts at a Glance
- LTA abolished: fully removed from 6 April 2024 (Finance Act 2024) — no cap on pension fund size
- Annual allowance 2026/27: £60,000 (or 100% of earnings, whichever is lower)
- Annual allowance taper: reduces by £1 per £2 earned over £260,000 — minimum tapered allowance: £10,000
- Lump Sum Allowance (LSA): £268,275 — lifetime cap on total tax-free lump sums you can take
- Lump Sum and Death Benefit Allowance (LSDBA): £1,073,100 — cap on tax-free lump sums plus death benefit lump sums
- 25% tax-free cash: still applies — but capped at £268,275 across all pension schemes lifetime
- Drawdown/annuity income: taxed at marginal income tax rate — unchanged by LTA abolition
- Existing LTA protections: may now affect your LSA — check with your pension provider or adviser
- Source: Finance Act 2024 | HMRC — Abolition of the Lifetime Allowance | GOV.UK
What the lifetime allowance was
The lifetime allowance (LTA) was the maximum amount of pension savings you could build up across all registered pension schemes — workplace and personal — before facing an additional tax charge. At its peak in 2011/12 it stood at £1.8 million. By 2022/23 it had been reduced to £1,073,100. Anyone with pension savings above the LTA faced a charge of 55% on excess lump sums, or 25% on excess income.
The LTA was widely criticised for discouraging pension saving by high earners — particularly NHS consultants, headteachers and senior civil servants — who faced retirement tax bills despite decades of pension contributions. The Spring Budget 2023 announced abolition, and the Finance Act 2024 completed the process from 6 April 2024.
What replaced it: the two new allowances
| Allowance | Amount (2026/27) | What it caps |
|---|---|---|
| Lump Sum Allowance (LSA) | £268,275 | Total tax-free lump sums taken from pension schemes across your lifetime (25% of old LTA) |
| Lump Sum and Death Benefit Allowance (LSDBA) | £1,073,100 | Total tax-free lump sums plus tax-free lump sum death benefits paid from your pension |
Once you exhaust your LSA of £268,275, any further pension lump sums — including your 25% tax-free cash — are taxed at your marginal income tax rate. For most pension savers, £268,275 represents a pension pot of approximately £1.07 million — the vast majority of savers will never reach this limit.
Annual allowance: unchanged for most people
The annual allowance — the amount you can contribute to pensions in a tax year while still receiving income tax relief — remains at £60,000 for 2026/27, or 100% of your earnings if lower. The money purchase annual allowance (MPAA) applies if you have accessed pension savings flexibly — it restricts your money purchase contributions to £10,000 per year.
The taper reduces the annual allowance for very high earners: it reduces by £1 for every £2 of adjusted income over £260,000, down to a minimum tapered allowance of £10,000 for those earning £360,000 or more.
What this means in practice
For the overwhelming majority of UK pension savers, the abolition of the LTA is straightforwardly positive — there is now no ceiling on how large your pension fund can grow, and no additional tax charge for disciplined long-term saving. The practical impact falls mainly on higher earners with pension pots approaching or above the old £1,073,100 threshold.
The 25% tax-free cash entitlement — one of the most valued features of UK pension saving — is preserved but capped. You can still take 25% of your pension tax-free on drawdown, but your total lifetime tax-free cash across all pensions is capped at £268,275.
Frequently asked questions
Can I now save unlimited amounts in my pension?
Yes — there is no lifetime cap on pension fund accumulation from 6 April 2024. You can contribute up to the annual allowance (£60,000 in 2026/27) each year and receive income tax relief on those contributions, regardless of your total fund size.
I was close to the old LTA — does this affect me?
Positively — you no longer face the old 55% or 25% LTA charge. However, your lump sum allowances (LSA and LSDBA) are calculated taking into account any pension benefits you took before April 2024. Your provider can tell you how much of your LSA has been used.
I had LTA protection (Fixed Protection, Individual Protection) — does it still matter?
Yes — existing protections now affect your LSA and LSDBA rather than the now-abolished LTA. They may give you a higher tax-free cash entitlement than the standard £268,275. Check with your pension provider or an FCA-regulated financial adviser before taking any pension benefits.
Is pension income still taxed?
Yes — income from pension drawdown and annuities is taxed at your marginal income tax rate, just as before. The LTA abolition affects only the tax charge on the fund size itself and on lump sums exceeding the new allowances — not ongoing pension income.
What is the money purchase annual allowance (MPAA)?
If you have flexibly accessed your pension (taken income drawdown or an uncrystallised fund pension lump sum), your annual allowance for money purchase contributions is permanently reduced to £10,000. This prevents people from recycling pension income back into pensions to gain multiple rounds of tax relief.
Sources & References
- HMRC — Abolition of the Lifetime Allowance from 6 April 2024: gov.uk
- Finance Act 2024 — Part 2 (pension provisions)
- House of Commons Library — Pension tax relief: the annual allowance and lifetime allowance (SN05901, April 2026)
- HMRC — Pensions Tax Manual (PTM174300) — Lump sum allowance and lump sum and death benefit allowance
- The Pensions (Abolition of Lifetime Allowance Charge etc) Regulations 2024 (SI 2024/356)
Disclaimer: For informational purposes only — not financial advice. Always verify at GOV.UK. More guides: our UK Finance hub.
