Abolition of the lifetime allowance: HMRC pension schemes newsletters 157 and 158

The lifetime allowance was abolished with effect from April 6, 2024. HMRC has published two newsletters on the topic, and also confirms that further minor technical changes are to be made in additional regulations later this year.

HMRC’s newsletter 157, published on March 28, 2024, sets out HMRC's responses to 39 frequently asked questions on the LTA abolition. They deal particularly with issues relating to retirements around April 6, 2024, and the transitional certificates for those members’ tax-free amounts.

Newsletter 158, published on April 4, 2024, highlights some key issues about the impact of the regulations that became effective from April 6, 2024. Further regulations will make minor changes, backdated to April 6, so schemes should ensure that members are aware that they may need to wait until these are effective before taking or transferring certain benefits, as their tax position could change.

The main instances for delay in proceeding include:

• Members with enhanced protection may wish to delay transferring to a new provider until the new legislation reflects the intention to allow members to allow members to carry over the benefit of enhanced protection.
• Members with primary or enhanced protection and protected lump sum rights may choose to either limit the amount of the pension commencement lump sum they decide to take or delay the payment of that sum in order that they can take their full entitlement, over the current lump sum allowance of £375,000.
• Personal representatives may wish to delay requesting the payment of a lump sum death benefit where the payment would be made from funds which crystallised prior to April 6, 2024, until the permitted maximum restriction is removed on such payments.
• Members may wish to request a delay to the payment of a pension commencement lump sum under scheme-specific lump sum protection until changes are made to correct an unintended "double counting" in the current legislation.

HMRC has begun the process of updating its online tax manual to reflect the LTA abolition and the new allowances. It has also updated its guidance for scheme administrators.