Taxation of pension benefits reform

Last updated: 02/10/2024

At Spring Budget 2023, the previous government announced that it would abolish the pension lifetime allowance (LTA). This was part of the previous government’s efforts to encourage inactive individuals to return to work, in particular those aged 50 and above.
Finance (No.2) Act 2023 removed the LTA charge and made other consequential changes. Finance Act 2024 removes the LTA itself and introduces two new allowances to limit the amounts of tax-free lump sums that can be taken in life and in death. It includes transitional measures, such as enhanced allowances for those who hold LTA protections or enhancement factors.
Timing: The legislative changes to abolish the LTA and introduce replacement allowances have effect from 6 April 2024. Finance Act 2024 includes powers that allow the government to change the legislation via statutory instrument until 5 April 2026.

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