Changes to pension and ISA rules effective from 6 April 2024

Changes to pensions

Understanding your Lump Sum Allowance and Lump Sum and Death Benefit Allowance

From 6 April 2024 two new allowances, the lump sum allowance and the lump sum and death benefit allowance, apply to most lump sums paid from a pension scheme. These limits replace the lifetime allowance which applied prior to 6 April 2024.

As with the lifetime allowance it is likely that these new limits will only affect a relatively small number of pension savers. However, if you are concerned about exceeding these limits on lump sums, we would recommend that you seek advice from a financial advisor.

The Lump Sum Allowance 

This is the total amount you can take tax-free in your lifetime:

• as a pension commencement lump sums (PCLS),
• from any uncrystallised funds pension lump sums (UFPLS), and
• as a stand-alone lump sum

For most people the lump sum allowance will be £268,275 but if you have applied for lifetime allowance protection you will be entitled to a higher lump sum allowance based, in most cases, on 25% of your protected lifetime allowance.

The Lump Sum and Death Benefit Allowance

This is the total amount of lump sums that can be paid tax-free to you during your lifetime, and to your beneficiaries following your death. The following payments count towards your lump sum and death benefit allowance:

• Pension commencement lump sums (PCLS)
• The tax-free element of all uncrystallised funds pension lump sums (UFPLS)
• Stand-alone lump sums
• Serious ill health lump sums
• Lump sum death benefits

For most people the lump sum and death benefit allowance will be £1,073,100 but if you’ve applied for lifetime allowance protection, you’ll be entitled to a higher lump sum allowance based on your protected lifetime allowance.

Taxation of lump sums

Once either your lump sum allowance or lump sum and death benefit allowance have been reduced to nil;

• you cannot receive any further PCLS payments.
• the full amount of any UFPLS taken will be subject to income tax at your marginal rate.
• any stand-alone lump sum paid will be subject to income tax at your marginal rate.

If your lump sum and death benefit allowance is nil, then;

• any serious ill health lump sum is taxable at your marginal rate of income tax, and
• any lump sum death benefit paid to your beneficiaries is taxable at their marginal rate of income tax.

This information is based on our understanding of current taxation law and HMRC practice, which may change.

Transitional Tax-Free Amount Certificate

Your lump sum allowance and lump sum and death benefit allowance will be reduced by benefits you’ve taken before 6 April 2024. This means:

• If no serious ill-health lump sum/death benefit lump sum was paid before age 75, your lump sum allowance and lump sum and death benefit allowance is reduced by 25% of the value of all benefit crystallisation events that occurred before 6 April 2024. 
• If a serious ill health lump sum/death benefit lump sum was paid before age 75, your lump sum and death benefit allowance is reduced by 100% of the value of all benefit crystallisation events that occurred before 6 April 2024. In this situation your lump sum allowance is still reduced as set out in the first bullet point.    

A transitional tax-free amount certificate allows your previous lump sums received to be more accurately measured and may mean that your lump sum allowance and/or lump sum and death benefit allowance is higher than the default method.

You can apply for a transitional tax-free amount certificate from any scheme you are currently a member of, but your application must be made before you first take a lump sum from any pension scheme. As part of applying for a transitional tax-free amount certificate you will need to provide evidence of the benefits that you received prior to 6 April 2024.

You can use the forms below to apply for a transitional tax-free amount certificate:

• Aegon Retirement Choices, One Retirement and Retiready Transitional tax-free amount certificate application form
• Aegon Platform Transitional tax-free amount certificate application
• Aegon & Scottish Equitable Pensions and Bonds Transitional tax-free amount certificate application form

Enhancements to your allowances

Prior to 6 April 2024, it was possible to apply for an increased lifetime allowance when the lifetime allowance was introduced and when it was subsequently reduced. From 6 April 2024, rather the providing an enhanced lifetime allowance, these protections will increase your lump sum allowance and lump sum and death benefit allowance. The table below confirms the allowances for each type of protection. 

Changes to our ISAs from 6 April 2024

Allowing subscriptions to multiple ISAs of the same type

We no longer need you to confirm that you haven’t contributed to another stocks and shares ISA in this tax year.  You must, of course, still remain within the overall ISA subscription limit of £20,000. 

If you see the following wording (or similar wording) in our legal declaration(s), you can ignore this as it no longer applies to our ISAs.

“I have not subscribed, and will not subscribe, to another stocks and shares ISA in the same tax year that I subscribe to this stocks and shares ISA.”

For example, you might see this when making an ISA application or making a payment to your ISA.

Partial transfers of current year ISA subscriptions

We don't offer or accept partial transfers of current year subscriptions.