Lifetime allowance at age 75 case study

Anyone who has pension benefits with a value in excess of the lifetime allowance will be subject to a tax charge, known as the lifetime allowance charge, on their excess benefits value when a benefit crystallisation event (BCE) happens. In this case study we look at how this works when somebody reaches age 75.

What happens at age 75?

A final test is done against the lifetime allowance.

At age 75 there is a test on:

  • any uncrystallised defined benefit pension rights – BCE 5
  • any uncrystallised defined contribution rights – BCE 5B
  • any growth in a drawdown plan since it was set up – BCE 5A

BCE 5 and BCE 5B are relatively straightforward; uncrystallised rights at age 75 are tested against the member’s remaining lifetime allowance as if they were being taken at that point.

BCE 5A tests any growth in a drawdown plan since it was set up.

Where a lifetime allowance test is done at the member’s 75th birthday any amount crystallising through these BCEs, over and above the available lifetime allowance will be taxed at the lower 25% rate.

Case study

Conor crystallised a personal pension plan with a value of £800,000 with provider A in 2016/17, taking £200,000 as tax-free cash. He put the balance of £600,000 into drawdown.

The lifetime allowance in 2016/17 was £1,000,000 and so the amount crystallised under plan A used up 80% (£800,000/£1,000,000) of the lifetime allowance. He has 20% of the lifetime allowance left.

He also has an uncrystallised personal pension plan with provider B.

He has no lifetime allowance protection.

When he reaches age 75 in 2021/22, his drawdown plan is worth £675,000. The amount tested against the lifetime allowance as a BCE 5A is therefore £75,000 (£675,000 – £600,000).

His uncrystallised personal pension plan is worth £150,000 at age 75, and this amount is tested against the lifetime allowance as a BCE 5B.

The total amount tested at age 75 is therefore £225,000 (£75,000 + £150,000).

The lifetime allowance he has available is £214,620 (20% of £1,073,100).

The excess over the available lifetime allowance is £10,380 (£225,000 - £214,620) and a lifetime allowance charge of £2,595 (25%) will apply.

If Connor is a basic rate taxpayer it may have been possible to take the £10,380 out of his drawdown plan before he reached age 75, paying basic rate tax at 20% and avoiding paying the lifetime allowance charge at 25%. However, there are other things to consider, such as the potential good investment growth in the pension and the extra money now forming part of his estate.

Further information


The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. Also it may not reflect the options available under a specific product which may not be as wide as legislations and regulations allow.

All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.

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The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm is on the Financial Services Register, registration number 117672. It provides life assurance and pensions. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London, EC3V 0RL.