HMRC - Lifetime allowance

From the 6th April 2006, HM Revenue and Customs (HMRC) introduced new simplified rules around how pensions are taxed. These rules introduced a lifetime allowance which is the total capital value of all your pension arrangements, but not your state pension, which you can build up without paying extra tax.

Members with pensions payable from the 6th April 2006, are required to declare all occupational and personal pension entitlement (except state, survivor’s or dependant’s pensions) before their pension can be paid. If the value of your benefits exceed your lifetime allowance a tax charge will be made against the excess.

The lifetime allowance has been fixed up to and including the 2010/2011 tax year, as follows:

There are protections for benefits earned up to 5 April 2006 in respect of those high earners affected by the introduction of the lifetime allowancde from 6 April 2006. You can find out more about these protections on the HMRC website at www.hmrc.gov.uk/pensionschemes/life-allow-pn.htm.

The Pensions Office will let you know the value of your Local Government Pension Scheme benefits when you retire and ask you about any other pensions you may have in payment so we can work out whether we need to deduct a recovery tax charge. This information should be provided promptly so it doesn't delay the payment of your pension.