The Lifetime Allowance Is Gone. Here's What Replaced It
For years the lifetime allowance hung over big pension pots: grow past £1,073,100 and the taxman took a slice of the excess, up to 55%. That world has ended. The charge went in April 2023 and the allowance itself was abolished in April 2024. There is now no limit on how large your pension savings can grow. But the old cap didn't vanish, it shape-shifted into two new allowances on tax-free lump sums, and plenty of guides online still describe the old system. Here's how it works now.
What actually changed
| Date | What happened |
|---|---|
| Before 6 April 2023 | Pension savings above £1,073,100 faced a lifetime allowance charge of up to 55% when tested |
| 6 April 2023 | The charge was removed, but the allowance still existed on paper |
| 6 April 2024 | The lifetime allowance was abolished entirely and replaced by two lump sum allowances |
The abolition removed the overall ceiling on tax-relievable pension savings (source: GOV.UK, HMRC guidance on individual lump sum allowances). Your pot can now grow to £2 million or £5 million without any tax charge on the size itself. What the government kept a lid on is the tax-free cash coming out.
The two allowances that replaced it
1. The lump sum allowance: £268,275
The lump sum allowance (LSA) is the most you can take from all your pensions, combined, as tax-free lump sums during your life. It's normally £268,275, which is exactly 25% of the old lifetime allowance, and it's frozen at that figure.
What counts towards it: the 25% tax-free lump sum (officially a pension commencement lump sum), and the tax-free quarter of any lump sum taken directly from an untouched pot. Take tax-free cash above your remaining allowance and the excess is taxed as income at your marginal rate, not at some special penalty rate.
2. The lump sum and death benefit allowance: £1,073,100
The lump sum and death benefit allowance (LSDBA) is normally £1,073,100. It caps the combined total of the tax-free lump sums you take in life plus tax-free lump sums paid to your beneficiaries if you die before 75. Above it, your beneficiaries pay income tax at their own marginal rate on the excess. Our death benefits guide covers what happens to a pension when you die, and the April 2027 inheritance tax change adds another layer worth knowing about.
Who actually needs to care
The maths only bites once your total pensions pass about £1,073,100, the point where 25% would exceed the lump sum allowance. Below that, you can ignore both allowances completely: your 25% tax-free cash works exactly as before. Above it, the tax-free portion is capped at £268,275 rather than a full quarter of the pot.
Maya has £1.4 million across her pensions. A quarter of that would be £350,000, but her lump sum allowance caps the tax-free amount at £268,275. She can still withdraw the rest whenever she likes, it's just taxed as income. Under the old rules her £326,900 of excess savings above the lifetime allowance could have faced a 55% charge. Now the pot's size triggers no charge at all.
If you took benefits before April 2024
Transitional rules knit the old and new systems together. The standard calculation is blunt: whatever percentage of your lifetime allowance you had used by 6 April 2024, HMRC assumes 25% of it was taken tax-free, and deducts that amount from your new allowances.
That assumption is sometimes wrong in your favour. If you actually took less tax-free cash than the standard calculation assumes (common if you took a pension with no lump sum, or a small one), you can apply for a transitional tax-free amount certificate, which substitutes your real figures. You must apply to one of your schemes before your first lump sum event after April 2024, with evidence covering all your schemes, so this is a check worth doing early rather than late (source: GOV.UK, checked August 2026).
Protections still work
If you hold one of the older lifetime allowance protections (Fixed Protection, Individual Protection and similar), your lump sum allowances are higher than the standard figures, based on your protected amount. Check your protection certificate or your HMRC online account before assuming the standard caps apply to you.
What this means in practice
- No cap on growth. There's no longer a tax reason to stop a pension growing, and no "lifetime allowance test" at 75.
- Contributions are still capped on the way in. The £60,000 annual allowance and the tax relief limits still apply. The lifetime cap went; the annual one didn't.
- Tax-free cash is the binding limit. For large pots, planning now revolves around the £268,275 lump sum allowance rather than pot size.
- Rules can change again. The lifetime allowance was introduced in 2006, cut three times, then abolished. Build plans on the current rules, but hold them loosely.
How big could your pot grow?
Try the free calculator and see what your contributions could build by retirement, now with no lifetime cap in the way.
Try the calculator →Common questions
Has the lifetime allowance been abolished?
Yes. The charge was removed from 6 April 2023 and the allowance was abolished from 6 April 2024. There's no limit on total pension savings any more, only on tax-free lump sums.
What is the lump sum allowance?
The maximum tax-free cash you can take from all your pensions in your lifetime: normally £268,275. Above it, lump sums are taxed at your marginal income tax rate.
What is the lump sum and death benefit allowance?
Normally £1,073,100. It covers your lifetime tax-free lump sums plus tax-free lump sums your beneficiaries receive if you die before 75. The excess is taxed at the recipient's marginal rate.
I took benefits before April 2024. Am I affected?
Transitional rules deduct 25% of the lifetime allowance you had used from your new allowances. If your real tax-free cash was less than that, a transitional tax-free amount certificate can preserve the difference, but you must apply before your first lump sum event under the new rules.
Sources
- Lifetime allowance abolition (6 April 2024), charge removal (6 April 2023) and previous 55% lump sum charge: GOV.UK, HMRC guidance on individual lump sum allowances.
- Lump sum allowance £268,275 and lump sum and death benefit allowance £1,073,100: GOV.UK; HMRC Pensions Tax Manual.
- Transitional rules and transitional tax-free amount certificates: GOV.UK; HMRC Pensions Tax Manual PTM174000. Figures correct as of August 2026.
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This article is for general information only and does not constitute financial advice. Allowance calculations depend on your personal circumstances, benefit history and any protections you hold; figures relate to the 2026/27 tax year and are correct as of August 2026. For advice tailored to you, speak to a financial adviser regulated by the Financial Conduct Authority (FCA), or get free guidance from MoneyHelper.