The lifetime allowance is a limit on the amount of pension savings that can be built up over your entire working life – whether lump sums or retirement income – and can be paid without triggering an extra tax charge. The lifetime allowance was introduced in 2006 at a level of £1.5m. Each time you take money from a pension scheme you use up a percentage of your lifetime allowance.
While most people aren’t affected by the lifetime allowance, you should take action if the value of your pension benefits is approaching, or above, the lifetime allowance
The lifetime allowance for the 2020/2021 tax year is £1,073,100. Some people may have registered for tax protection with HM Revenue & Customs in the past; but otherwise, you may be charged if you go over this limit. If you think you may exceed the lifetime allowance limit, you should get financial advice.