The Lifetime Allowance (LTA) is the total value of all pension benefits you can have without triggering an excess benefits tax charge. If the value of your pension benefits when you take them, (not including any state retirement pension, state pension credit or any partner's or dependant's pension you are entitled to), is more than the Lifetime Allowance, or more than any protections you may have, you will have to pay tax on the excess benefits.
The Lifetime Allowance covers any pension benefits you have in all tax-registered pension arrangements - not just the LGPS.
The LTA limit for 2022/2023 is £1,073,100.
The LTA will not impact on the majority of LGPS members as their pension benefits will be well within the limit.
How Lifetime Allowance is calculated
To work out the LTA you have used on your LGPS pension with us, we do the following calculation for you:
20 x Annual Pension + Tax Free Lump Sum + AVC Fund Value = Lifetime Allowance used
If you would like to check your LTA yourself, you can use the LTA Quick Check Tool which can be found here but please read the instructions page first before using the Quick Check Tool.
What if I exceed or am close to exceeding the LTA?
You should take action if the value of your pension benefits is near or more than the Lifetime Allowance limit. As pensions are normally a long term commitment, what might appear modest today could exceed the Lifetime Allowance by the time you take your benefits. Decisions you make now may mean that you exceed your Lifetime Allowance and be subject to a tax charge in future.
If you are close to exceeding your LTA limit, you can apply to HMRC for Individual Protection or Fixed Protection. This may prevent a tax charge or lessen the amount of the tax charge.
If you have an LTA tax charge as a result of your pension benefits with us exceeding the LTA limit, you can either pay the tax charge directly to HMRC or you can have the tax charge deducted from the value of your pension benefits by Clwyd Pension Fund (so long as the tax charge is within a certain limit).