Member Benefits
The Lifetime Allowance ceased to exist on the 6th April 2024. Previously when benefits were taken from a pension fund (a benefit crystallisation event) they were tested against the Lifetime Allowance and the growth in any crystallised funds as well as any uncrystallised funds were also tested when you reached age 75. The Lifetime Allowance has been replaced with two new allowances – the Lump Sum Allowance (LSA) and the Lump Sum and Death Benefit Allowance (LSDBA).
Is there a limit on my benefits?
There is no limit on the benefits that may be provided under your SIPP or SSAS. However, when you take benefits from your SIPP or SSAS, the total value of all of your pension funds will be tested against your Lump Sum Allowance (LSA) and your Lump Sum and Death Benefit Allowance (LSDBA).
What is the Lump Sum Allowance?
The Lump Sum Allowance (known as the pension commencement lump sum allowance) is the maximum tax free lump sum payment that you can receive from all pension arrangements. For an individual with no form of protection the Lump Sum Allowance (LSA) is currently set at £268,275.
What is the lump sum and death benefit allowance?
It is a new allowance which all authorised lump sum and lump sum and death benefits are tested against. For an individual with no form of protection the Lump Sum and Death Benefit Allowance is currently set at £1,073,100.
At a relevant benefit crystallisation event, on death or on the payment of a serious ill health lump sum the amounts paid out will be tested against your Lump Sum and Death Benefit Allowance.
The table below shows the Lump Sum Allowance and Lump Sum and Death Benefit Allowance limits for an individual depending on their circumstance.
For an individual with Enhanced Protection their Lump Sum and Death Benefit Allowance is equal to the value of their uncrystallised funds on 5th April 2024.
| Protection | Applicable Amount | Lump Sum Allowance | Lump Sum and Death Benefit Allowance |
| None | 25% of the amount being crystallised | £268,275 | £1,073,100 |
| Fixed Protection 2012 | 25% of the amount being crystallised | £450,000 | £1,800,000 |
| Fixed Protection 2014 | 25% of the amount being crystallised | £375,000 | £1,500,000 |
| Fixed Protection 2016 | 25% of the amount being crystallised | £312,500 | £1,250,000 |
| Individual Protection 2014 | 25% of the amount being crystallised | 25% of the Individual Protection figure | Your individual protection figure – which will be between £1.25 million and £1.5 million |
| Individual Protection 2016 | 25% of the amount being crystallised | 25% of the Individual Protection figure | Your individual protection figure – which will be between £1 million and £1.25 million |
| Enhanced Protection (no protected tax free cash) | 25% of the amount being crystallised | £375,000 | Value of uncrystallised rights held on 5th April 2024 |
| Enhanced Protection (protected tax free cash) | % confirmed on certificate | Lower of % applied to fund at crystallisation or % of fund value at 5th April 2023 | Value of uncrystallised rights held on 5th April 2024 |
| Primary Protection (no protected tax free cash) | 25% of the amount being crystallised | £375,000 x the primary protection factor | £1,800,000 x the primary protection factor |
| Primary Protection (protected tax free cash) | There is a formula to use which changes depending on the date of any previous crystallisation | There is a formula to use which changes depending on the date of any previous crystallisation |
What payments will be deducted from my Lump Sum Allowance?
The following payments will be deducted from your Lump Sum Allowance (LSA):
- Payment of a tax free lump sum referred to as a pension commencement lump sum
- The non taxable amount of an Uncrystallised Funds Pension Lump Sum (UFPLS)
What payments will be deducted from my Lump Sum and Death Benefit Allowance?
The following payments will be deducted from your Lump Sum and Death Benefit Allowance (LSDBA):
- Any pension commencement lump sum paid– the amount of the tax free lump sum paid
- The total non taxable amount paid of a stand alone lump sum
- The non taxable amount paid of an Uncrystallised Funds Pension Lump Sum (UFPLS)
- The total of any serious ill health lump sums paid
- The total of any Uncrystallised Lump Sum Death Benefits paid
- The total of any Drawdown Lump Sum Death Benefits paid
What if the value of my pension scheme is in excess of the Lump Sum Allowance?
It is not possible for a SIPP or SSAS to pay a tax free lump sum in excess of the Lump Sum Allowance. If the size of your pension fund is in excess of your available Lump Sum Allowance any excess will be moved into your drawdown pot and any pension payments from this pot will be taxed at your marginal rate of income tax.
What if the value of my pension scheme is in excess of the Lump Sum and Death Benefit Allowance?
Any payments from a SIPP or SSAS on death which are in excess of the Lump Sum and Death Benefit Allowance will be taxed at the recipient’s marginal rate of income tax. Please see the Death Benefits section for further information.
What happens if I have taken benefits prior to the 6th April 2024 and subsequently take benefits?
If you have taken benefits from your pension fund before the 6th April 2024 and wish to take more benefits after the 6th April 2024 we will use a standard formula provided by HM Revenue & Customs (HMRC) to covert the Lifetime Allowance percentage figure into a Lump Sum Allowance and Lump Sum and Death Benefit Allowance figure. If you wish to rely on a transitional tax free cash certificate this must be received before your first crystallisation post 6th April 2024 detailed on Lump Sum
When can I take my benefits?
You may commence your benefits from your pension fund (known as ‘crystallisation’) at any time from age 55. There is no requirement for you to stop working or ‘retire’ when you take your benefits. You may be able to take your benefits earlier than age 55 in one of the following circumstances:
- You become seriously ill, or
- Your pension fund is made up of funds transferred from an existing pension with a lower pension age provided that the transfer to your SIPP or SSAS complied with certain HM Revenue & Customs (HMRC) requirements.
The minimum pension age will increase to age 57 from April 2028.
Can I take my benefits in stages?
Yes, you can crystallise a percentage of your pension fund and take benefits from this crystallised fund leaving the rest uncrystallised. This means that instead of taking your benefits in one go, you could take your benefits in stages by crystallising portions of your fund so as to suit your own personal requirements.
What are my benefit options?
The options available are:
- A pension commencement lump sum and a pension income. The income can be taken either as Flexi Access Drawdown (FAD), Capped Drawdown (subject to certain criteria outlined below) or an Annuity; or
- An Uncrystallised Funds Pension Lump Sum (UFPLS)
Can I get help with understanding my options?
Taking your benefits is a complex process, which can lead to irreversible decisions. Taking large benefit payments from your pension fund may not be tax efficient or sustainable, especially if you are reliant on your pension to support you for the rest of your life. It is therefore essential that you have all of the information necessary to make an informed decision on what is best for you.
There are two main places that you can go to get help with understanding your options. These are:
- A financial adviser who is regulated by the Financial Conduct Authority (FCA)
- Pension Wise, which is a Government service that offers free impartial guidance on your benefit options.
We will provide more details on these options when you come to take your benefits or on request.
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