The Lifetime Allowance (LTA)

The Lifetime Allowance (LTA) is £1,073,100 from April 2020. If the value of your pension benefits from all UK-registered pension schemes exceeds the LTA at the point you draw them, you will incur a tax charge on the amount over the LTA in force at that date.

Protections are available and further information is available at www.hmrc.gov.uk/pensionschemes/pension-savings-la.htm

The value of your BA benefits to compare against the LTA is worked out as 20 times your annual rate of pension plus any AVCs. So if your BA pension at retirement is £6,000 a year and you have an AVC balance of £5,000, the value of your pension is worked out as follows:

20 x £6,000 a year + £5,000 = £125,000

Or, if you take a tax-free lump sum when you draw your pension benefits (from AVCs and by exchanging some of your pension), the value of your pension is worked out as 20 times your remaining yearly pension, plus the value of your lump sum.

20 x £4,200 a year = £84,000 plus your lump sum of £20,000 = £104,000

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Generally, you will have to pay a Lifetime Allowance charge if the value of any benefits you draw exceeds your LTA or your remaining LTA if you have previously drawn a benefit. The Lifetime Allowance charge is set at 25% if your additional savings are taken as a pension, and 55% if taken as a lump sum.

Need more information?
Read our LTA charge guide for more details:

LTA charge guide
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You can find more information about protection from LTA charges on the HMRC website: www.hmrc.gov.uk/pensionschemes/pension-savings-la.htm

Members with high value benefits at 5 April 2006 were able to register with HMRC (up until April 2009) for protection against this charge, known as 'Primary protection' and 'Enhanced protection'.

When the government reduced the LTA from £1.8 million to £1.5 million from 6 April 2012, members whose pension value exceeded £1.5 million had a second opportunity to apply for protection, known as ‘Fixed Protection 2012’ (FP12), up until 5 April 2012. FP12 maintained a personal LTA of £1.8 million after 6 April 2012, provided the member did not save AVCs or build up any further pension benefits.

Protections were available to members in relation to the reduction in the LTA to £1.25 million from April 2014. Members needed to register with HMRC for Fixed Protection 2014 (FP14) and surrender any enhanced protection they may hold by 5 April 2014. Members had until 5 April 2017 to register for Individual Protection 2014 (IP14).

Further protections were available to members following the reduction in the LTA to £1 million from April 2016. Members needed to register with HMRC for Fixed Protection 2016 (FP16) and surrender any enhanced protection they may hold by 5 April 2016. Members can apply for Individual Protection 2016 (IP16) at any time after 5 April 2016 to protect the value of their pension benefits at 5 April 2016 up to a maximum value of £1.25 million.

HMRC did not set a deadline for applications for FP16 or IP16. Instead, if you wish to rely on IP16 or FP16 you should apply for this protection using HMRC’s online application service, before drawing your benefits. HMRC will issue a reference number which you will need to provide to the Pension Scheme when drawing your pension benefits.

Please note that if you have registered for FP12, FP14 or and you are still employed by BA, you need to be aware that you may be automatically enrolled into the British Airways Pension Plan (BAPP) under government rules. British Airways’ auto-enrolment date occurs every three years starting 1 January 2013.

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