PTM171000 - Lump sum allowance and lump sum and death benefit allowance: lump sum allowance

As of 6 April 2024 there is no longer lifetime allowance. If you are looking for information about protections, enhancement factors and the lifetime allowance charge please see these pages on The National Archives. If you are looking for information about the principles of lifetime allowance and benefit crystallisation events please see these pages of The National Archives.

The lump sum allowance
Relevant benefit crystallisation events
Protected or enhanced lump sum allowance
Calculating the remaining lump sum allowance and any income tax charge
Authorised lump sums that can only be paid if the member has some lump sum allowance
Pension commencement excess lump sum


The lump sum allowance 

Chapter 15A Section 637P ITEPA 2003

Individuals are entitled to a lump sum allowance of £268,275 unless they have a protected right to a higher lump sum allowance (explained below).

If an individual exceeds £268,275 when a relevant benefit crystallisation event occurs, the excess of the lump sum will be subject to income tax at the individual’s marginal rate.

Once the first relevant benefit crystallisation occurs for an individual, their lump sum allowance availability will need to be determined for each subsequent event. However, only when the lump sum allowance has been exceeded should it be reported to HMRC (see PTM161800).

Relevant benefit crystallisation events

Chapter 15A Section 637Q ITEPA 2003

A relevant lump sum for the purpose of the lump sum allowance is:

  • A pension commencement lump sum,
  • An uncrystallised funds pension lump sum, and
  • A stand-alone lump sum

When a relevant benefit crystallisation event occurs, the scheme administrator compares the amount of relevant lump sum being paid to the member’s lump sum allowance that is still available. Any amount that exceeds the level of lump sum allowance available is subject to an income tax charge.

An unauthorised payment is not a relevant benefit crystallisation event.

For more details on relevant benefit crystallisation events see PTM173000.

Protected or enhanced lump sum allowance

There are various allowance enhancements and protections, these can protect the members rights to a higher level than the usual lump sum allowance of £268,275 when a relevant benefit crystallisation event occurs. 

These are:

Calculating the remaining lump sum allowance and any income tax charge

When calculating the amount of lump sum allowance being used up at a relevant benefit crystallisation event, to calculate whether a member has enough lump sum allowance to cover the lump sum being paid (and whether or not any income tax is due) the scheme administrator may require details from the member of:

  • How much of the lump sum allowance has already been used by previous relevant benefit crystallisation events,
  • What benefit crystallisation events may be arising at the same time from other registered pension schemes,
  • What lump sum allowance the member is entitled to (if they have a protected allowance).

How a scheme administrator establishes these details is not prescribed by legislation. It may be that a scheme administrator is content in certain circumstances to rely on a simple member declaration. But in other circumstances the scheme administrator may feel a more detailed questionnaire is necessary, with supporting evidence. If a member fails to provide the information, then the scheme administrator will assume that the individual has no lump sum allowance available.

Authorised lump sums that can only be paid if the member has some lump sum allowance 

A pension commencement lump sum can only be made if the member has some lump sum allowance and lump sum death benefit allowance available at the time of the payment.

For the full conditions relating to the above lump sum see  PTM063000.

Pension commencement excess lump sum 

Where an individual’s lump sum allowance has been fully utilised, subject to the scheme’s rules, any pension entitlement or uncrystallised funds crystallising beyond this point may be paid entirely as a lump sum.  

Any lump sum payment representing the excess rights is called a pension commencement excess lump sum – for more detail see PTM177000.