How the new rules will limit tax-free lump sum payments in lifetime and on death
The lifetime allowance (LTA) will be abolished on 5 April 2024. It will be replaced by a new set of rules that will instead limit tax-free lump sum payments both in lifetime and on death. There will be no limits on any funds used to provide a taxable pension income.
Although no LTA charges have applied since 6 April 2023, for tax year 2023/24 the LTA framework has remained in place. This is an interim measure while HMRC work on a new set of rules to abolish the LTA entirely from 6 April 2024. HMRC have worked closely with the pensions industry to try and introduce a workable solution. Whilst there are a still a few technical issues to resolve, we now have a good idea of how the new rules are intended to work.
The aim is that there are no fundamental changes to the way pensions work. It’s just that new rules must be introduced to limit lump sum payments that were previously restricted by the LTA.
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