HM Revenue & Customs (HMRC) has published guidance following the Spring Budget on Wednesday - telling administrators they should continue to administer lifetime allowance (LTA) checks but confirming those with protections would now be able to accrue further benefits.
In its pensions schemes newsletter number 148 for March 2023, published yesterday (16 March), HMRC confirmed the chancellor's Budget announcement that the lifetime allowance charge would be removed from 6 April 2023 and the LTA would be fully abolished from the 2024/25 tax year through a future Finance Bill.
It reminded stakeholders that the LTA framework would therefore "remain in place" from 6 April 2023 - telling administrators they would need to continue to operate LTA checks when paying benefits, for example assessing whether an individual has available lifetime allowance, and to issue benefit crystallisation event statements.
HMRC's newsletter also noted that, as a result of the Budget changes to the LTA, the maximum amount which a member can take as a pension commencement lump sum (PCLS) will be frozen at £268,275 — 25% of the current standard lifetime allowance of £1,073,100.
It added that members with a protected right to a higher PCLS would continue to be able to access this right.
HMRC also said that members who hold a valid enhanced protection or any valid fixed protections - where this protection was applied for before 15 March 2023, and a certificate or reference number subsequently issued - will be able to accrue new pension benefits, join new arrangements or transfer without losing this protection from 6 April 2023. It said they will also keep their entitlement to a higher PCLS.
Other lump sums
HMRC additionally said where payments from lump sums - such as the serious ill-health lump sum, uncrystallised funds lump sum death benefit, defined benefits lump sum death benefit and lifetime allowance excess lump sum - would currently be subject to an LTA charge at 55%, from 6 April 2023 they would be taxed at the recipient's marginal rate.
