How do you calculate lifetime allowance?

To calculate the total pension value for lifetime allowances, for these pensions, there’s a formula. Multiply your expected annual pension by 20 and add this figure to the amount of any tax-free, cash lump sum from that pension.

Can I still protect my lifetime allowance?

Yes, you can continue saving into a pension. But any pension savings above the level of your protected lifetime allowance will be liable for tax on the excess, called the lifetime allowance charge.

How do I avoid the lifetime allowance charge?

A common strategy is to withdraw tax-free cash from the pension. This leaves fewer funds in the pension to grow, reducing the potential second LTA charge at age 75.

What is percentage of lifetime allowance?

The rate of tax you pay on pension savings above your lifetime allowance depends on how the money is paid to you – the rate is: 55% if you get it as a lump sum. 25% if you get it any other way, for example pension payments or cash withdrawals.

How is the value of a lifetime allowance calculated?

For pensions that start to be drawn on or after 6 April 2006, the value of those pension benefits, for the purposes of the lifetime allowance, is calculated by multiplying your annual pension by 20 and adding any lump sum you draw from the pension scheme (including any lump sum drawn from an in-house AVC fund).

When to apply for protection from lifetime allowance?

Work out the value of your pension to apply for protection from the lifetime allowance reduction. To apply for individual protection from the 2016 reduction in lifetime allowance you need to tell HMRC the: money (which gained UK tax relief) you put into an overseas pension between 6 April 2006 and 5 April 2016

What was the lifetime allowance in fixed protection 2016?

Fixed protection 2016 fixes your lifetime allowance at £1.25m, but you can no longer contribute to your pension. This tends to be the right option for people who no longer want or need to save into a pension any more.

What should I do if my pension is approaching the lifetime allowance?

If you think the value of your pensions is approaching the lifetime allowance you should consider taking action. PensionBee can help you calculate how much your pensions are worth, as once you’ve found any old workplace pensions we can help you consolidate these together with a pension provider name and ideally the policy number too.