RPSM11300010 - Administrator Pages: Lifetime allowance: Overview: How is the lifetime allowance is applied?

What is the purpose of the lifetime allowance?

From 6 April 2006 there will be no limit on the amount of benefits an individual can take. But there is a limit on the amount of tax privileged pension savings that an individual may accumulate without incurring special tax charges, which is the lifetime allowance. This limit applies to the aggregate of all benefits that are payable to an individual from all registered pension schemes for which the individual is a member.

The amount of the standard lifetime allowance is initially set at £1.5 million for the tax year 2006-07 and will be increased for subsequent tax years see RPSM11101010. There are however circumstances under which the amount of the standard lifetime allowance can be increased to give an enhanced lifetime allowance for a particular individual.