LSA calculator — the lump sum allowance on tax-free cash

The Lifetime Allowance stopped being a test on the fund and became two ceilings on tax-free cash. The LSA is the lifetime one: £268,275, set at 25% of the old £1,073,100 LTA and frozen there — it does not index. Its sibling, the LSDBA, covers lifetime and death together at £1,073,100. A PCLS is tested against both, and the smaller headroom binds.

Three payments consume the LSA. A pension commencement lump sum consumes it pound for pound; so does the tax-free element of an uncrystallised funds pension lump sum (UFPLS); and so does a stand-alone lump sum — the wholly tax-free payment available to members with primary or enhanced protection, or with pre-A-Day scheme-specific tax-free cash rights. Income never touches it: drawdown withdrawals, annuity purchase and a scheme pension leave the allowance exactly where it was. That is the structural break from the old regime, which tested the fund itself rather than the tax-free cash taken out of it.

Two payments that look as though they should count do not. A serious ill-health lump sum, and a tax-free death benefit paid before age 75, are tested against the lump sum and death benefit allowance alone — never against the LSA. And the LSA is not the only cap on a lump sum: the permitted maximum, broadly 25% of the value crystallised alongside it, still applies, so a PCLS has to clear both limits and the lower one binds.

The LSA is a personal, lifetime running total — not a per-scheme or per-arrangement figure. Lump sums from every registered pension the member holds draw on the same ceiling, in the order the events happen, and the ceiling is frozen: it does not index with inflation and it does not reset at the start of a tax year. A member who takes tax-free cash from three schemes across five years has one allowance between them, and a fourth event is measured against whatever is left of it.

Fixed protection preserves a former lifetime-allowance ceiling as a higher LSA: FP2012 £450,000, FP2014 £375,000, FP2016 £312,500. Individual Protection 2014 and 2016 set the LSA at 25% of the member's protected LTA — up to £375,000 (IP2014, protected LTA capped at £1.5m) and £312,500 (IP2016, capped at £1.25m). Enhanced and Primary Protection carry member-specific figures from the certificate. The quick tool above covers FP2012, FP2014, FP2016, IP2014 and IP2016; Enhanced and Primary Protection route to the full workflow.

Benefits crystallised under the old LTA regime reduce the LSA by 25% of the lifetime allowance actually used — the percentage used × £1,073,100, with older events first revalued onto that basis. Where the member actually took less tax-free cash than that default assumes, a Transitional Tax-Free Amount Certificate can substitute the evidenced figure, sometimes recovering substantial allowance.

The certificate binds both ways. Once issued it replaces the default even where the evidenced figure is worse than the standard deduction, and it must be applied for before the member's first relevant benefit crystallisation event on or after 6 April 2024; after that the default is locked in. Run the TTFAC calculator before relying on either figure.

Exceeding the allowance does not block the payment. Where the scheme's rules allow it, the excess is paid as a pension commencement excess lump sum and taxed as the member's pension income for the year in which it is paid, at whatever marginal rate applies once it is stacked on their other income for that year. There is no 55% or 25% charge anywhere in the post-April-2024 framework. Not every scheme offers one, so check the rules before assuming the excess can be taken as cash.

Two consequences follow. The year an excess falls into changes what it costs, in a way the old flat charges did not; and because the excess is taxable income like any other, it counts towards adjusted net income, so a large one can erode the personal allowance on its way through the computation. Both effects are illustrative here — the tool above prices the allowance position, not the member's full income-tax computation.

Age 75 does not close the test: a pension commencement lump sum and the tax-free element of a UFPLS keep consuming the lump sum allowance after the member's 75th birthday, even though the old regime's age-75 benefit crystallisation events have gone.