Lifetime Allowance (LTA)
The LTA is the total value of all your private and work pensions, but not any state pension, which you can build up without paying extra tax. The LTA for tax year 2008 – 2009 is £1.65 million. Just before you start receiving your pension benefits your pensions administrator will ask you for information so that they can work out whether you have gone over the LTA. If the value of the pension benefits you are about receive payment of takes you over, or you have already used up, your LTA you will have to pay any tax due on the excess.
Most people will not get anywhere near the LTA for example a member of premium would need to be getting pensions worth over £80,000 a year before they were affected. You can find out more at:
www.civilservice-pensions.gov.uk/pensions_and_tax/
pensions_and_tax_high_earners.aspx.
So what happens when I retire?
When you retire you will need to tell your pensions administrator about any other pensions you have and give them the information they ask for, so that they can work out whether you have enough LTA left to take your benefits without having to pay extra tax. They will send you a certificate showing how much of your LTA has been used up by the pension which has come into payment.
If the total value of all your pensions is over the LTA, they will work out how much tax you need to pay and deduct it direct from your pension. If your Civil Service pension takes you over the LTA you may, if you wish, pay the tax in a lump sum.
Your pensions administrator will not start paying your Civil Service pension until you have told them about your other pensions and they can work out how much LTA you have left.
