Lump Sum Allowance

The Lump Sum Allowance

The Government has brought in new legislation from 6 April 2024 called the Lump Sum Allowance which places a limit on the amount of the cash lump sum that you can draw from all of your pension arrangements before you become liable to pay income tax.

The Lump Sum Allowance is £268,275.

Lump Sum and Death Benefit Allowance

The Government has also introduced a limit on the total level of tax-free benefits that can be paid in relation to a member of a registered pension scheme, including the payment of tax-free benefits on a member’s death. This limit is called the Lump Sum and Death Benefit Allowance and has been set at £1,073,100. Any cash lump sum that you take will also reduce your available Lump Sum and Death Benefit Allowance.

Further information regarding the Lump Sum Allowance and Death Benefit Allowance can be found at pensionwise.gov.uk.

What should you do?

If you do have other pension schemes which you are considering taking money out of, it is important that you talk to your provider to understand if any of the above affects you.

If you are affected then it is up to you to make sure that you don’t go over your Annual Allowance.

Further information regarding Annual Allowance can be found on pensionwise.gov.uk