Lifetime Allowance

Since 6 April 2006 there has been no absolute limit on the level of benefits an individual can be provided with under a registered pension scheme such as the Teachers’ Pension Scheme. Instead each individual has an allowance - a Lifetime allowance (LTA)The Lifetime Allowance or LTA is the amount of pension benefits that can be taken before a tax charge is payable at the point the pension benefits come into payment – in respect of all their pension benefits before they become subject to tax charges at the point of taking benefits.

From the 2018/19 tax year LTA increases each year in line with the annual rate in Consumer Price Index (CPI). The LTA limit for 2019/20 is £1.055m. More information can be found here.

From 6 April 2016 the Lifetime Allowance limit reduced from £1.25m to £1m. Therefore, HMRC introduced two types of ‘transitional protection’:

• Fixed Protection (FP16) – any member can apply for this protection, whether your benefits exceed £1million or not, provided you don’t have any ‘relevant benefit accrual’. Therefore you’ll need to consider taking steps to opt out of the Teachers' Pension Scheme and cease active membership of all other registered pension schemes before 5 April 2016.
• Individual Protection (IP16) – you can apply for this protection if the value of your benefits in registered pension schemes from all sources is between £1m and £1.25m as at 5 April 2016. It will allow you to build up further benefits without losing this protection. However, the future LTA will be a capped at the lower of the value of your benefits at 6 April 2016 and £1.25m.

If you had benefits that were already in excess of £1m at 5 April 2016, or are likely to exceed £1m when you reached your Normal Pension Age (NPA)The age at which you're eligible to claim retirement benefits without actuarial reduction.. The age at which you're eligible to claim retirement benefits without actuarial reduction, you may want to consider applying for ‘transitional protection’.

If you do have protection, then you'll need to provide to Teachers’ Pensions a certificate reference number (for paper certificates) or, a protection notification number, and the Scheme administration number (for online applications) from HMRC in respect of the protection, before Teachers’ Pensions can calculate the benefits payable.

We've created a series of briefing notes to help you understand the changes.

Briefing notes