Pensions – The Lifetime Allowance

The lifetime allowance is a limit on the amount of value a person can have saved in pension schemes without incurring any additional tax charge.  If this pension savings limit is exceeded then tax is charged on the excess over the limit when a pension is drawn.

For pension benefits exceeding the lifetime allowance the excess amount is liable to additional tax at a rate of 25%.

The Pension Lifetime allowance was reduced from £1.8M to £1.5M in 2012.  From 6th April 2014 this fell still further to £1.25M.

To compare your NHS pension savings against the lifetime limit you multiply your annual pension by 20 and add the lump sum.  Provided that the total is less than the lifetime limit then you will avoid the additional tax charge.  However, some doctors leave it too late to do this calculation leaving them no option but to pay the additional tax.

The lifetime allowance includes all pension savings not just the NHS Pension Scheme.  You need to include all private pension provisions when considering the limit.

How We Can Help

We correspond with the NHS Pension authority on your behalf to obtain details of your anticipated future NHS Pension to enable us to check how close you are to the lifetime limit.

We can put you in touch with a specialist medical IFA who can advise you of your various options.