LSA and LSDBA

The lifetime allowance (LTA) was abolished on 5 April 2024 which means there are no limits on any funds used to provide a taxable pension income.

However, there is a limit on the amount of tax-free lump sum (Lump Sum Allowance) payable to the client during their lifetime, and a limit on the amount of tax-free lump sum that can be paid both in lifetime and on death (Lump Sum and Death Benefit Allowance).

The objective of the Lump Sum Allowance and Lump Sum & Denefit Benefit Allowance calculator is to provide an indication of the LSA & LSDBA available, taking into account;

– Whether the client has existing Lifetime Allowance protection,

– Benefits taken (before and/or after 6 April 2024),

– Transitional Tax Free Amount (TTFA) certificate(s) produced before the first Relevant Benefit Crystallisation Event after 6th April 2024.

Lump Sum Allowance (LSA)

This restricts the amount of tax-free lump sum payable i.e. tax-free cash and the tax-free elements of Uncrystallised Fund Pension Lump Sums (UFPLS) to the member in their lifetime to £268,275.

The limit can be higher for those individuals with Lifetime Allowance protections.

However, if a client took less than the deemed amount of LSA used, they can apply for a Transitional Tax-Free Amount (TTFA) Certificate so they have more LSA available in the future.

By inputting benefits taken before 06/04/2024, the calculator will show the deemed amount of LSA used and therefore whether the client should apply for a TTFA certificate.

Lump Sum and Death Benefit Allowance (LSDBA)

This restricts the amount of tax-free lump sum that can be paid during the client’s lifetime and on their death to £1,073,100. Similarly to LSA, the limit can be higher for those individuals with Lifetime Allowance protections.

If the client has taken any LSA during their lifetime, as outlined above, and/or received any Serious Ill Health payments, this will reduce the LSDBA available on death.