Prior to April 2023, there was a limit on how much you could save into your pension over a lifetime while still receiving tax relief, this was known as the Lifetime Allowance (LTA).
Under previous legislation, the LTA was set at £1,073,100. In the March 2023 Budget, the Chancellor announced that pension savers will not have to pay penalty tax charges for going over the LTA in the 2023/24 tax year. Effectively the LTA will be abolished altogether from April 2024 (subject to a new Finance Bill being passed).
The Chancellor also confirmed that anyone who holds an ‘enhanced’ or ‘fixed’ LTA protection will be able to make further pension savings without losing this protection (or a
Tax-free cash limit or Pension Commencement Lump Sum (PCLS) is the amount of tax-free cash you can take from your pension savings. The PCLS is normally restricted to 25% of your pension savings. Although not an issue for most people, the PCLS limit will be frozen at 25% of the current LTA level (which means it will be capped at £268,275) from April 2023. Anyone with a protected right to a higher PCLS is expected to retain this right.
Money Purchase Annual Allowance (MPAA) applies if you flexibly accessed benefits from a Defined Contribution (DC) pension after 6 April 2015. This is the maximum amount you can contribute to DC arrangements before having to pay tax and includes Scheme Money Purchase Additional Voluntary Contributions (MPAVCs). From 6 April 2023, it is set at £10,000. If it applies to you, there will be a tax charge on the excess.