Lifetime allowance is the total benefits you can build up from all registered pension schemes without incurring a tax charge
All pension benefits you build up use a percentage of your lifetime allowance. This includes pensions outside the NHS Pension Scheme (apart from the State Pension).
The lifetime allowance is currently £1,073,100.
This has changed over time. You can view the lifetime allowance by year (Excel: 15KB).
View our guide to NHS Pensions and the lifetime allowance (PDF: 63KB), which explains more about the lifetime allowance.
Risk of charge at retirement
The value of your pension benefits that exceed the lifetime allowance are subject to a tax charge. This comes into effect when you take your benefits.
If you have long membership and high earnings, you may be at risk of the charge at retirement.
Working out the capital value of your pension benefits
To find out if the capital value of your pension benefits might exceed the lifetime allowance, you need to add both of these together:
- capital value of your NHS pension benefits
- value of all your other pension benefits
Follow this simple calculation to work out the capital value of your NHS pension benefits to be paid:
Capital value = (annual pension amount x 20) + lump sum
Lifetime allowance charge
The lifetime allowance charge is a form of tax for which both you and the scheme administrator are jointly liable.
The rate of tax charged will depend on whether you take any benefits that exceed the lifetime allowance as a pension or a lump sum.
The lifetime allowance charge is:
- 55% if you are taking the excess as a lump sum
- 25% of the capital value where you take it as a taxable pension income
NHS Pensions pays your lifetime allowance charge to HMRC. We recover the cost by permanently reducing your NHS pension benefits.
The calculation used for the recovery charge from your pension reflects life expectancy.
Our lifetime allowance charge examples (PDF: 273KB) show how we deduct the charge.
Effects of charge on dependent’s pensions
A children’s pension is never reduced.
We may reduce an adult dependent’s pension. This will depend on the value of the pension being paid.
Confirmation will be provided at the time of payment.
Since the lifetime allowance was introduced, HMRC has periodically made a number of different forms of lifetime allowance protections available to members that enable them to take pension benefits of more than the lifetime allowance. Currently you can only make an application for Individual Protection 2016.
Individual Protection 2016
Individual Protection 2016 factsheet (PDF: 89KB)Individual Protection 2016 valuation request form (Officer) (Word: 109KB)Individual Protection 2016 valuation request form (Practitioner) (Word: 94.5KB)Cash Equivalent Transfer Value (CETV) (FA11a) form
If you’re joining or rejoining the scheme because of auto enrolment, read the effect on Enhanced or Fixed Protection (PDF: 168KB).
Closure of the 1995/2008 Scheme and the move to the 2015 Scheme
All members of the NHS Pension Scheme will be members of the 2015 Scheme from 1 April 2022 as part of the changes to public service pension schemes. Any active members of the 1995/2008 Scheme on 31 March 2022, will automatically move into the 2015 Scheme on 1 April 2022. View more information on these changes.
Members with enhanced or fixed protection, who move and contribute to the 2015 NHS Pension Scheme from the 1 April 2022, will lose their protection on the day they start to contribute to the 2015 Scheme. This is because HMRC’s rules say that you cannot keep these types of protection once you start contributing to another registered pension scheme and the 2015 Scheme is a separately registered pension scheme with HMRC to the 1995/2008 Scheme.
More information about the impact of joining a new pension scheme on enhanced or fixed protection can be found in HMRC’s Pension Tax Manual (PTM):
- If you have enhanced protection see PTM092410.
- If you have fixed protection see PTM093400. Members with fixed protection should also ensure they have checked for benefit accrual to ensure their fixed protection is still valid, see PTM093500.
If you have either enhanced or fixed protection you should urgently consider your lifetime allowance position carefully before 31 March 2022 and if necessary, take appropriate independent financial advice. You can find more information about financial advice on our website. Your employer and NHS Pensions are not authorised to provide financial advice.
If you've already moved from the 1995/2008 Scheme to the 2015 Scheme and lost your enhanced or fixed protection
In 2015 the government made changes to most public service pension schemes, including the NHS Pension Scheme. These reforms didn’t apply to members closest to retirement. The Court of Appeal later found that this discriminated against younger members and the government is making changes to remove this age discrimination.
You’ll be affected by the changes if you joined a public service pension scheme on or before 31 March 2012 and you were a member of the scheme on or after 1 April 2015, or you left service after 31 March 2012 but returned within 5 years. You can find out more about the changes and if you’re affected on our changes to public service pensions web hub.
If you’re affected, as part of the changes on 1 October 2023, any service you have in the 2015 Scheme between 1 April 2015 and the 31 March 2022 will be returned to the 1995/2008 Scheme.
This means if you previously had enhanced or fixed protection and lost this because you moved and started contributing to the 2015 Scheme, this protection will no longer be lost when your service up to 31 March 2022 is returned to the legacy scheme, as long as:
- you have not continued contributing as a member of the 2015 Scheme from 1 April 2022
- you have not lost the protection due to another reason.
If this applies to you, you should urgently consider your lifetime allowance position carefully before 31 March 2022 and if necessary, take appropriate independent financial advice. You can find more information about financial advice on this website. Your employer and NHS Pensions are not authorised to provide financial advice.
Losing enhanced or fixed protection
If you lose your enhanced or fixed protection as a result of your move to the 2015 Scheme, you are required to notify HMRC within 90 days of the loss taking place. If you start to contribute to the 2015 Scheme on 1 April 2022, you will need to notify HMRC by 29 June 2022.
Previous HMRC protection arrangements
There are several protection arrangements where the deadline for applying has now passed.
Individual Protection 2014
Fixed Protection 2016
If you think lifetime allowance may affect you, we recommend getting independent financial advice.
Under the Financial Services and Markets Act of 2000, all financial advisers have to decide whether to be ‘independent’ or ‘restricted’.
A financial adviser who is ‘independent’ can offer a range of financial services and products from across the entire market, whereas a financial adviser who is ‘restricted’ can only offer the products from one or a series of companies.
Before you ask for advice, make sure you know which type of adviser you are dealing with. Most financial advisers will charge for their advice.