Lifetime Allowance: Upcoming Increases, When They Apply and How Doctors with Protection are Affected 

The Lifetime Allowance is the limit anyone can withdraw from their pension schemes – either through lump sums or retirement income – without incurring an extra tax charge known as the Lifetime Allowance Charge.  The standard Lifetime Allowance is currently £1 million, and it will be increased in line with the Consumer Prices Index (CPI) from 6 April 2018.

The rate of CPI applying to the first increase is 3%, so for the tax year 2018/19 the Lifetime Allowance will be £1,030,000.  Future rates of CPI are unknown, but the government’s target for CPI is 2%.  Assuming this target is met in future, the standard Lifetime Allowance will increase as follows: 

















Existing Protection 

For doctors who have registered for primary or individual protection, the Lifetime Allowance used when taking their benefits will be the higher of their protected Lifetime Allowance or the standard Lifetime Allowance. 

For example: 

  • Dr White is a deferred member of the 1995 Scheme. He registered for Individual Protection 2016 and has a protected Lifetime Allowance of £1,100,000
  • If he takes his pension in tax year 2021/22, the Lifetime Allowance used to test his pension will be his protected Lifetime Allowance of £1,100,000 as this is higher than the standard Lifetime Allowance of £1,093,200
  • However, if he takes his pension in tax year 2022/23 the Lifetime Allowance applying will be the standard Lifetime Allowance of £1,115,100 as this is higher than his protected Lifetime Allowance of £1,100,000    

Taking benefits shortly 

The standard Lifetime Allowance increases will take effect on 6 April each year.  Doctors who intend to take benefits and who may be affected by the Lifetime Allowance may wish to hold off taking benefits until after 5 April when any benefit taken will use up a lower percentage of the available Standard Lifetime Allowance than it would if taken before then.  For example a £1 million pension taken on 5 April 2018 will use up the entire Lifetime Allowance but taken on 6 April 2018 will use 97.09% of the increased Lifetime Allowance (this example assumes no Lifetime Allowance protection applies).  

The difference may seem marginal but could make a reasonable difference in the future.  If, for instance, the Lifetime Allowance does increase to £1,183,600 in 2025/26 as projected above, an individual with 2.81% of the Lifetime Allowance remaining could take benefits from a further pension worth £33,259 with no Lifetime Allowance charge.  If the full Lifetime Allowance had instead been exhausted, there would be a tax charge of £18,292 on taking the same pension in 2025/26.  This assumes the pension is taken as a lump sum, for which the Lifetime Allowance charge is 55%. 

The benefit is even clearer for an individual with a pension worth £1,020,000.  If taken on 5 April 2018 the £20,000 excess would be subject to a Lifetime Allowance Charge of £11,000 (assuming it is taken as a lump sum and the 55% charge applies).  If taken on 6 April 2018 there would be no excess and no Lifetime Allowance Charge.

An independent financial adviser will be able to help ensure you take your pension benefits in the most tax efficient manner, protecting your overall wealth for your retirement and also saving inheritance tax for your future beneficiaries.  If you require advice please contact Richard Higgs CFP FPFS on 0117 966 5699 or

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