Changes to pension tax rules from 6 April 2024

On 15 March 2023, the Chancellor unveiled the Spring Budget announcing changes to pension tax rules. The most significant of these changes was the abolition of the lifetime allowance from 6 April 2023. The lifetime allowance was the maximum you could have in pension savings without having to pay a tax charge on the excess.

Form 6 April 2024, the government plans to introduce 3 new limits:

• A lump sum allowance limit of £268,275 – This is the total tax-free lump sum limit you can receive from all your pensions, including your LGPS pension, unless you have a valid protection certificate that entitles you to a higher tax-free amount. Any lump sum in excess of this limit will be taxed at your marginal rate.
• A lump sum death benefit allowance of £1,073,100 – This is the total tax-free lump sum amount that can be paid from pensions to beneficiaries if someone dies before age 75. Any lump sum in excess of this limit is taxed at the individual’s marginal rate.
• An overseas transfer allowance of £1,073,100 – This is the total value of pensions you can transfer to a Qualifying Recognised Overseas Pension Scheme (QROPS). Any amount in excess of this limit will be subject to a 25% tax charge.

If you have a valid protection certificate, you may be able to take a higher tax-free lump sum.

If you retire after 6 April 2024, we will need to check your remaining lifetime allowance if you have previously received any pension benefits as we usually would. However, we will also need to request information about any lump sums you may have already received.

The Finance Bill has not yet passed into law and is subject to changes. We are also awaiting further guidance before we can provide any detailed information. Once this is received, we will update the tax controls section of our website.