With the recent announcement of the Lifetime Allowance (LTA), you may have several questions regarding it. So, to help you know how these changes will affect you, here is a list of FAQs about lifetime allowance.

What is the standard Lifetime Allowance?
Introduced on 6 April 2006, the standard Lifetime Allowance is the maximum amount of pension you can save without a tax charge over your lifetime. The LTA applies to your entire pension saving except the State pension.

How much is the standard LTA?

At the standard LTA was set at £1.5 million, the current standard LTA is set at £1.25 million. This is further set to reduce to £1m from April 2016.

Who will be affected?
If you have undrawn pension funds in the UK registered pension schemes and certain overseas pension schemes , where the aggregate lifetime savings exceed £1 million in value as at 6 April 2016, this reduction will affect you.

This reduction will also affect you if you have a defined benefit (final salary) pension scheme and your pension entitlement is more than £50,000 per assuming no lump sum or other pension benefits has been taken out of the schemes.

What protections are available?
It has been proposed that there will be two types of protection called fixed protection and individual protection for those wanting to apply for protection against the reduction in the lifetime allowance in 2016. And, to know which protection is right for you, you should need to consider certain aspects of each protection.

While fixed protection 2016 will be give you a set lifetime allowance of £1.25 million on whatever the value of your pension savings are now, individual protection 2016 will give you a personal lifetime allowance which depend on the value of your pension savings at 5 April 2016.

For fixed protection 2016, the application will be available before 6 April 2016. And, the application for individual protections will probably be available from 6April 2016 to 5^th April 2019.

What is the maximum lump sum available?
Since 6 April 2006, the maximum lump sum is restricted to 25% of the capital value of the benefits to be paid; or 25% of the available standard LTA.

If you have more queries regarding the lifetime allowance, get in touch with your pension adviser and get expert assessment today.