PTM174600 - Lump sum allowance and lump sum and death benefit allowance: Transitional rules for the tax year 2024-25: Individual 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.
Individual protection 2014 (IP14)
Individual protection 2016 (IP16)
Individual protection 2014 (IP14)
Paragraph 1 Schedule 6 Finance Act 2014
Individuals who had pension savings in excess of £1,250,000 could apply to HMRC for IP14 protection from the lifetime allowance charge when those rights come in payment after 5 April 2014.
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 lump sum death benefit allowance (see PTM172000) protected.
Individuals with IP14 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 Schedule 9 Finance Act 2024
For an individual with IP14, the lump sum and death benefit allowance (LSDBA) will be the lesser of £1,500,000 or 25% of the individual’s relevant amount (see PTM176520), and they will be subject to the transitional lump sum and death benefit allowance calculations (see PTM174200).
If an individual has taken less of their benefits before 6 April 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 PTM1743000.
Example
Hamish dies, aged 68, on 11 March 2026. A relevant benefit crystallisation event occurs on 7 May 2026 as a Hamish’s nominee is paid £200,000 as an uncrystallised funds pension lump sum death benefit. To work out his available lump sum and death benefit allowance he must first deduct a percentage of the value of any benefit crystallisation events (BCEs) that occurred prior to 6 April 2024.
Hamish held valid IP14 protection.
Hamish does not have a transitional tax-free amount certificate.
Hamish’s lifetime allowance previously-used amount isf £400,000.
25% of this figure (£100,000) is deducted from his lump sum and death benefit allowance.
As Hamish has valid FP14, his lump sum and death benefit allowance is the lesser of £1,500,000 or his relevant amount. The relevant amount is the total value on 5 April 2014 of the member’s pension rights in all their relevant arrangements. Hamish’s relevant amount is £1,200,000, which is less than £1,500,000.
£1,200,000 - £100,000 = £1,100,000
Therefore, Hamish’s available lump sum and death benefit allowance at 6 April 2024 is £1,100,000.
The amount of the relevant benefit crystallisation event occurring on 7 May 2026 needs to be deducted from this figure:
£1,100,000 – £200,000 = £900,000
As of 7 May 2026, Hamish’s has £900,000 lump sum and death benefit allowance remaining.
Lump sum allowance availability
Paragraph 125 Schedule 9 Finance Act 2024
For an individual with IP14, their lump sum allowance will be the lesser amount of either £375,5000 or 25% of the individual’s relevant amount, and they will be subject to the transitional lump sum allowance calculations (PTM174100).
If an individual has taken less of their benefits before 6 April 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 PTM1743000.
Example
Kate has a relevant crystallisation event on 12 September 2026. She receives a pension commencement lump sum (PCLS) of £80,000. To work out her available lump sum allowance she must first deduct a percentage of the value of any BCEs that occurred prior to 6 April 2024.
Kate has valid IP14 protection.
Kate does not have a transitional tax-free amount certificate.
Kate’s lifetime allowance previously-used amount is £420,000.
25% of this figure (£105,000) is deducted from her lump sum allowance.
As Kate has IP14 her lump sum allowance is the lesser of £375,000 or 25% of her relevant amount. The relevant amount is the total value on 5 April 2014 of the member’s pension rights in all their relevant arrangements. Kate’s relevant amount is £1,640,000, of which 25% is £410,000, so £375,000 is the lesser amount.
£375,000 - £105,000 = £270,000
Kate’s available lump sum allowance at 6 April 2024 is £270,0500. Therefore, Kate’s lump sum allowance is sufficient for her to receive the tax-free PCLS of £80,000.
The amount of the relevant benefit crystallisation event occurring on 12 September 2026 then needs to be deducted from this figure.
£270,000 – £80,000 = £190,000
Kate’s lump sum allowance as of 12 September 2028 is £190,000
Individual protection 2016 (IP16)
Paragraph 9 Schedule 4 Finance Act 2016
Individuals who had pension savings in excess of £1,000,000 could apply to HMRC for IP16 protection from the lifetime allowance charge when those rights came into payment after 5 April 2016.
As of 6 April 2024, the lifetime allowance charge has been abolished, but an individual is entitled to have their lump sum allowance and lump sum and death benefit allowance protected.
Individuals with IP16 that have had benefit crystallisation events 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.
Lump sum and death benefit allowance availability
Paragraph 126 Schedule 9 Finance Act 2024
For an individual with IP16, the lump sum and death benefit allowance will be the lesser of £1,250,000 or the individual’s relevant amount (see PTM176430), and they will be subject to the transitional lump sum and death benefit allowance calculations (see PTM174200).
If an individual has taken less of their benefits before 6 April 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 PTM1743000.
Example
Phillipa has a relevant benefit crystallisation event on 29 March 2028. She receives a PCLS of £100,000. To work out her available lump sum and death benefit allowance she must first deduct a percentage of the value of any BCEs that occurred prior to 6 April 2024.
Phillipa does not have a transitional tax-free amount certificate.
Phillipa’s lifetime allowance previously-used amount is £500,000.
25% of this figure (£125,000) is deducted from her individual lump sum and death benefit allowance.
As Phillipa has valid IP16, her lump sum and death benefit allowance is the lesser of £1,250,000 or her relevant amount. The relevant amount is the total value on 5 April 2016 of the member’s pension rights in all their relevant arrangements. Philippa’s relevant amount is £1,400,000, so £1,250,000 is her lump sum and death benefit allowance as it is the lesser amount.
£1,250,000 - £125,000 = £1,125,000
Phillipa’s available lump sum and death benefit allowance at 6 April 2024 is £1,125,000. Therefore, Philippa’s lump sum and death benefit allowance is sufficient for her to receive the tax-free PCLS of £100,000.
The amount of the relevant benefit crystallisation event occurring on 29 March 2028 then needs to be deducted from this figure.
£1,125,000 – £100,000 = £1,025,000
Phillipa’s lump sum death benefit allowance at 29 March 2028 is £1,025,000.
Lump sum allowance availability
Paragraph 125 Schedule 9 Finance Act 2024
For an individual with IP16, the lump sum allowance will be the lesser of £312,500 or 25% of the individual’s relevant amount, and they will be subject to the transitional lump sum allowance calculations (PTM174100).
If an individual has taken less of their benefits before 6 April 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
Continuing with the example of Phillipa above.
Philippa receives a PCLS of £100,000 on 29 March 2028. She has IP16 and her lifetime allowance previously-used amount is £500,000.
25% of this figure (£125,000) is deducted from her lump sum allowance.
As Phillipa has IP16, her lump sum allowance is the lesser of £312,500 or 25% of her relevant amount. Philippa’s relevant amount is £1,400,000, of which 25% is £350,000, so £312,500 is the lesser amount.
£312,500 - £125,000 = £187,500
Phillipa’s available lump sum allowance at 6 April 2024 is £187,500. Therefore, Philippa’s lump sum allowance is sufficient for her to receive the tax-free PCLS of £100,000.
The amount of the relevant benefit crystallisation event occurring on 29 March 2028 then needs to be deducted from this figure.
£187,500 - £100,000 = £87,500
Phillipa’s lump sum allowance as of 29 March 2028 is £87,500.