PTM174500 - Lump sum allowance and lump sum and death benefit allowance: Transitional rules for the tax year 2024-25: Primary protection
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.
Primary protection
Primary protection: lump sum and death benefit allowance availability
Primary protection: lump sum allowance availability
Primary protection enhancement factor
Primary protection
Individuals who had pension savings worth over £1,500,000 on 5 April 2006 could apply to HMRC for protection from the lifetime allowance charge when those rights come into payment (crystallise) after 5 April 2006.
Individuals that have valid primary protection cannot give up the protection, but it could be reduced or lost if they become subject to a pension debit as a result of a pension sharing order.
As of 6 April 2024, the lifetime allowance charge has been abolished, but an individual is entitled to have their lump sum allowance (see PTM171000) and lymp sum and death benefit allowance (see PTM172000) protected.
Individuals with primary potection that have had benefit crystallisation events (BCEs) prior to 6 April 2024 will need to consider the below information to calculate their lump sum and lump sum death benefit allowance availability prior to their first relevant benefit crystallisation event.
These transitional rules apply from the 2024-25 tax year.
Lump sum and death benefit allowance availability
Paragraph 126(3A) Schedule 9 Finance Act 2024
For an individual with primary protection, but no lump sum protection, the lump sum and death benefit allowance (LSDBA) will be £1,800,000 and they will be subject to the transitional lump sum and death benefit allowance arrangements (see PTM174200). However, the maximum amount that can be deducted from their LSDBA is £375,000.
If an individual has taken less of their benefits before 6 Aprl 2024 as tax-free lump sums than assumed under the standard transitional calculation, and the individual has complete evidence of this, they can request a transitional tax-free amount certificate from their certification administrator, see PTM174300.
Example 1
Petra dies, aged 70, on 3 September 2024. A relevant benefit crystallisation event occurs on 10 October 2024 as Petra's nominee is paid £150,000 as an uncrystallised funds lump sum death benefit.
Petra held valid primary protection without any additional lump sum protection.
Petra does not have a transitional tax-free amount certificate.
Petra's lifetime allowance previously-used amount is £1,610,000.
25% of this figure (£402,500) would ususally be deducted from her lump sum and death benefit allowance. However, as Petra has primary protection the deduction from her LSDBA cannot exceed £375,000. So, £375,000 is deducted, as this is the lesser of the two amounts.
£1,800,000 - £375,000 = £1,425,000
Therefore, Petra's available lump sum and death benefit allowance at 6 April 2024 is £1,425,000.
The amount of the relevant benefit crystallisation event occurring on 10 October 2024 then needs to be deducted from this figure.
£1,425,000 - £150,000 = £1,275,000
Petra's available lump sum and death benefit allowance at 10 September 2024 is £1,275,000.
Example 2
Robert has a relevant benefit crystallisation event on 27 September 2025. He receives a pension commencement lump sum (PCLS) of £150,000. Robert already has a transitional tax-free amount certificate confirming his transitional tax free amount is £100,000.
The information Robert provided to his pension scheme was accurate and complete.
Robert has valid primary protection without any additional lump sum protection.
Robert's transitional tax-free amount is deducted from his lump sum and death benefit allowance. As Robert has primary protection, this is fixed at £1,800,000.
£1,800,000 - £100,000 = £1,700,000
Robert's lump sum and death benefit allowance at 6 April 2024 is £1,700,000. Therefore, Robert's lump sum and death benefit allowance is sufficient for him to receive the tax-free PCLS of £150,000.
The amount of the relevant benefit crystallisation occuring on 27 September 2025 then needs to be deducted from this figure.
£1,700,000 - £150,000 = £1,550,000
Robert's available lump sum and death benefit allowance at 27 September 2025 is £1,550,000.
Lump sum allowance availability
Paragraph 125(3A) Schedule 9 Finance Act 2024
For an individual with primary protection, but no lump sum protection, the lump sum allowance will be £375.000 and they will be subject to the transitional lump sum allowance arrangements (see PTM174100).
If an individual has taken less of their benefits before 6 April as tax-free lump sums than assumed under the standard transitional calculation, and the individual has complete evidence of this, they can request a transitional tax-free amount certificate from their certification administrator, see PTM174300.
Example
Krishna has a relevant benefit crystallisation event on 5 March 2026. She receives a pension commencement lump sum (PCLS) of £30,000.
Krishna has valid primary protection without any additional lump sum protection.
Krishna does not have a transitional tax-free amount certificate.
Krishna's lifetime allowance previously-used amount is £145,000.
25% of this figure (£36,250) is deducted from her lump sum allowance. As Krishna has primary protection, this is fixed at £375,000.
£375,000 - £36,250 = £338,750
Krishna's available lump sum allowance at 6 April 2024 is £338,750. Therefore, Krishna's lump sum allowance is sufficent for her to receive the tax-free PCLS of £30,000.
The amount of the relevant benefit crysallisation event occuring on 5 March 2026 then needs to be deducted from this figure.
£338,750 - £30,000 = £308,750
Krishna's lump sum allowance at 5 March 2026 is £308,750.
Primary protection enhancement factor
Paragraph 6A Schedule 36 Finance Act 2004
Individuals with primary protection also have a primary protection enhancement factor. The enhancement factor can be applied to their lump sum and death benefit allowance when the following relevant benefit crystallisation event occurs:
This also includes the following relevant lump sums:
For all relevant benefit crystallisation events that occur where the individual has valid primary protection, the individual’s enhanced lump sum death benefit allowance is calculated using this formula:
£1,800,000 + (£1,800,000 x EF)
EF is the lump sum death benefit allowance enhancement factor, which is the aggregate of all enhancement factors in relation to the relevant benefit crystallisation even.
You can read more about enhancement factors PTM175100.
Example
Eliza has a relevant benefit crystallisation event on 29 September 2030. She receives a serious-ill health lump sum (SIHLS) of £1,500,000.
Eliza already has a transitional tax-free amount certificate confirming her transitional tax-free amount is £200,000.
The information Eliza provided to her certification administrator was accurate and complete.
Eliza has primary protection and a primary protection enhancement factor of 0.4.
Eliza's enhanced lump sum and death benefit allowance is calculated.
£1,800,000 + (£1,800,000 x 0.4) = £2,520,000
Eliza's enhanced lump sum and death benefit allowance is £2,520,000.
Eliza's transitional tax-free amount is deducted from her enhanced lump sum and death benefit allowance.
£2,520,000 - £200,000 = £2,320,000
The amount of the relevant benefit crystallisation occuring on 29 September 2030 then need to be deducted from this figure.
£2,320,000 - £1,5000,000 = £820,000
Eliza is not liable for any income tax at their marginal rate as the lump sum has not exceeded Eliza's enhanced lump sum and death benefit allowance.