The lifetime allowance (LTA) replacement regime

From 6 April 2024, the lifetime allowance (LTA) replacement regime came into force in the UK, impacting on UK residents and expatriates. The UK has three new allowances focussing on lump sums drawn from pensions:

  • Lump sum allowance (LSA) – this is set at £268,275, which is 25% of the old lifetime allowance. This is used for UK resident tax-free payments such as Pension Commencement Lump Sum and the tax-free elements of any Uncrystallised Funds Pension Lump Sum (UFPLS) payments.
  • Lump sum and death benefit allowance (LSADBA) – this is set at £1,073,100, the same figure as the old LTA. This is used for:
    • PCLS payments, tax-free elements of UFPLS payments, serious ill health lump sums (particularly for clients under age 75), defined benefit lump sum death benefits and uncrystallised funds lump sum death benefit as well as pension protection lump sum death benefit (LSDB), annuity LSDB, drawdown pension LSDB and flexi-access drawdown LSDB
  • Overseas Transfer Allowance – this replaces the prior Benefit crystallisation 8 rules under the old regime for transfers to QROPS. Benefits can be transferred tax free if they are within the allowance, but they are taxable at 25% where it has been exceeded (as they would under the old LTA regime).

For further information, please contact PX Wealth on 03300 947 477 or by email to welcome@px-wealth.com and we’ll be pleased to assist.