From 6 April 2024, two new lump sum allowances have been introduced: Lump Sum Allowance (LSA) and Lump Sum and Death Benefit Allowance (LSDBA).
These lump sum allowances restrict the payment of tax-free cash but, as with the previous Lifetime Allowance, most members will not be impacted by these.
The Lump Sum Allowance (LSA) is the total amount of lump sum you can take in your lifetime without incurring a tax charge. This covers any pension benefits you have across all tax-registered pension arrangements - not just the LGPS.
The LSA is set at £268,275 from 6 April 2024. There is no provision for this amount to be increased automatically, for example by the rate of inflation. Those members who have a valid HMRC protection from the Lifetime Allowance may have a different LSA.
Lump sums paid in excess of the LSA are taxed at your marginal rate.
When you take your LGPS benefits we will ask you for details of any pension benefits you have already taken and the percentage of the Lifetime Allowance that those benefits have used up.
The Lump Sum and Death Benefit Allowance (LSDBA) is set at £1,073,100 from 6 April 2024. There is no provision for this amount to be increased automatically, for example by the rate of inflation. Those members who have a valid HMRC protection from the Lifetime Allowance may have a different LSDBA.
Any payment which is in excess of the deceased member's available LSDBA is taxable as income in the hands of the beneficiary. The reporting and payment of this tax is the responsibility of the deceased member's personal representative.
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