Benefit options and allowances

Lump sum allowance and lump sum and death benefit allowance

The lifetime allowance charge was removed from 6 April 2023. The lifetime allowance has been replaced by a lump sum allowance and a lump sum death benefit allowance from 6 April 2024. 

Lump sum and lump sum death benefit allowance from 6 April 2024

Protecting benefits and tax-free cash

It is currently possible to protect benefits from income tax if they exceed the lump sum allowance and lump sum and death benefit allowance. This protection has the effect of locking the lump sum allowance and lump sum and death benefit allowance a certain rate, meaning the reduction won't apply. However, there are conditions which, if broken, will result in protection being lost.

Fixed protection

Individual protection

Pre 6 April 2006 benefits and tax-free cash

Pensions legislation changed on 6 April 2006. However, it was possible to protect existing benefits. It was possible for members of pension schemes set up before 6 April 2006 to protect the benefits that they already had. There were 2 types of protection - primary protection and enhanced protection.

Primary and enhanced protection

Scheme specific tax-free cash

Individuals who had a right to more than 25% tax-free cash on 6 April 2006 and who didn't opt for protection (see above) may still have their tax-free cash entitlement protected. This is called scheme specific protection.

Protection of scheme specific tax-free lump sum

Transitional tax-free amount certificates

Here we explain what a transitional tax-free amount certificate is and does. How to decide whether to apply for one and what information would allow you to successfully apply for one.

Transitional tax-free amount certificates – an explanation

Basics

This analysis focuses on when benefits can be taken, summarises the main options available and also looks at the restrictions that apply.

Protected pension ages, including the increase to 57 in 2028

Safeguarded benefits

Taking benefits

Case studies

Cashing in your pension fund to purchase a property

Emergency rate income tax

Protection of scheme specific tax-free cash 

Uncrystallised fund pension lump sum, drawdown, scheme specific TFC and the permissive statutory override

Income drawdown

One of the most popular options is income drawdown. There are two types: capped and flexi-access drawdown.

Flexi-access drawdown - Since 6 April 2015 any new drawdown plans must be a flexi-access drawdown plan. 

What is flexi-access drawdown?

Capped drawdown - New capped drawdown plans were only available until 6 April 2015. Existing plans can continue as long as the GAD limit is not exceeded.

Capped income drawdown and review dates

Beneficiary drawdown - Beneficiary drawdown is a death benefit option.

Beneficiary drawdown

Lifetime allowance (before 6 April 2024)

The lifetime allowance charge was removed from 6 April 2023. The lifetime allowance has been replaced by a lump sum allowance and a lump sum death benefit allowance from 6 April 2024. 

Lifetime allowance and benefit crystallisation events before April 2024

Lump sums

Sometimes it's possible to exchange all pension benefits for a one-off lump sum.

Trivial commutation lump sums

Small lump sums

Uncrystallised funds pension lump sums

Winding-up lump sums

Emergency rate tax

An explanation of when emergency rate tax applies and how to get it back.

Emergency rate income tax

Reaching age 75 

We look at reaching age 75 in our top five FAQs

Reaching age 75: our top five frequently asked questions

Recycling

Once benefits have been taken, it's possible to re-use this money and pay it back into a pension. However, you won't be surprised to hear that there are rules and restrictions in place.

Recycling of tax-free cash

Our frequently asked questions

Here we look at some of the questions we are asked most often. 

Income drawdown

Pension protection - Primary, enhanced, individual and fixed protections and scheme specific tax-free cash

Retirement

Triviality and small pots