The Lump Sum Allowance (LSA) is the UK's 2024-onward limit on the total tax-free cash you can take from pension schemes during your lifetime. It is set at £268,275 for most savers — the same as 25% of the old £1,073,100 Lifetime Allowance, but now expressed as a hard cash cap rather than a percentage of the pot. The LSA replaced the abolished Lifetime Allowance from 6 April 2024.
What changed in April 2024
Until April 2024, UK pensions had a Lifetime Allowance (LTA) of £1,073,100. Pots above that faced an excess tax charge of 55% on lump sums or 25% on income. The LTA was abolished in two phases: the charge was zeroed in April 2023, and the rules were formally replaced in April 2024 with three new allowances:
- Lump Sum Allowance (LSA) — £268,275. Tax-free cash lump sums.
- Lump Sum and Death Benefit Allowance (LSDBA) — £1,073,100. Tax-free cash including death benefits.
- Overseas Transfer Allowance (OTA) — £1,073,100. Limit on QROPS transfers.
For most savers planning retirement, the LSA is the one that bites. It caps tax-free pension cash at £268,275 — slightly more than the average UK pension pot but well within reach for higher earners and senior public-sector workers.
How the LSA works in practice
When you crystallise pension benefits (start drawing income or take a lump sum), 25% of the crystallised amount is typically tax-free — up to the LSA cap. Above the LSA, lump sums are taxed at your marginal income tax rate (20%/40%/45%).
| Total pension pot | Tax-free cash available |
|---|---|
| £200,000 | £50,000 (25%, well under LSA) |
| £500,000 | £125,000 (25%, under LSA) |
| £1,000,000 | £250,000 (25%, under LSA) |
| £1,073,100 | £268,275 (25% — exactly at LSA) |
| £1,500,000 | £268,275 (LSA capped — the additional £106,725 of "tax-free" is taxed at marginal rate) |
So once your pension exceeds £1,073,100, additional contributions don't increase the tax-free cash you can take. They do still benefit from tax relief on the way in and tax-free growth — just no extra tax-free withdrawal.
Protected LSAs — higher caps for some savers
If you registered for "protection" under the old LTA regime, your LSA is higher than £268,275:
- Fixed Protection 2016 — LSA of £312,500 (25% of £1,250,000)
- Fixed Protection 2014 — LSA of £375,000 (25% of £1,500,000)
- Fixed Protection 2012 — LSA of £450,000 (25% of £1,800,000)
- Individual Protection 2016 — LSA = 25% of the lower of pot value at 5 April 2016 or £1,250,000
- Enhanced Protection — LSA usually = 25% of your pot value at the relevant date
If you have any of these, the higher LSA is preserved subject to the conditions originally attached. Most often this means you can't make new contributions to the protected scheme.
Common LSA mistakes
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LSA, LSDBA and OTA introduced by Finance Act 2024. Rules at HMRC Pensions Tax Manual. Protection registration via gov.uk/protect-your-lifetime-allowance.
UK Tax Drag is not authorised by the Financial Conduct Authority and does not provide regulated financial advice — see the content disclaimer for the full position. The methodology page documents how every calculator is built and reviewed.
Related
- Tax-free lump sum calculator — optimal withdrawal phasing
- Should I take 25% tax-free lump sum? — the timing decision
- Pension drawdown tax calculator — income tax on the taxed portion above the LSA
- Pension tax traps — common mistakes in pension withdrawal
- Full UK money glossary
- FAQ library
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