As regular readers of my blogs will know the government hasn’t actually abolished the Lifetime Allowance tax charge. They just don’t call it the Lifetime Allowance tax charge anymore. There remain four BCEs (Benefit Crystallisation Events) i.e. circumstances where a tax charge still applies. Legislation finally abolishing it in the form of next year’s Finance Act, has been promised by the Conservatives.

The government has announced that the Lifetime Allowance doesn’t apply this tax year which isn’t strictly true. Furthermore, the Labour Party has already announced that if they win the next General Election next tax year they will re-introduce the Lifetime Allowance so potentially the current tax year may be the only opportunity you will have to avoid it in future.

Even if Labour were to win the next General Election next tax year they may or may not re-introduce it and, if they do, it may not be re-introduced under identical rules. Even though it is not certain that Labour will win the next General Election, they are so far ahead in the opinion polls that I believe it is safer to assume that they will be elected and that they will re-introduce the Lifetime Allowance in pretty much the same form as before. Although I could be wrong these will be the assumptions on which the rest of this blog is based. This blog is also only based on individuals whose pensions are mainly or fully money purchase pension schemes otherwise known as defined contribution schemes as opposed to final salary pension schemes otherwise known as defined benefit schemes.



If you have a pension which is close to or in excess of the Lifetime Allowance of £1,073,100 then you should consider switching it into a so-called Flexi Access Drawdown account.  This could be with your existing pension provider or a new one if your existing pension provider does not offer the facility. This is the first step. If you wish to avoid taxation it is important to consider not crystallising it (by taking benefits) and not taking out any cash from it other than the Pension Commencement Lump Sum (tax free cash lump sum) within the frozen maximum limit of £268,275. That’s because if you do, you will still suffer a “Lifetime Allowance” tax charge on the excess above the Lifetime Allowance limit which will be taxed at your marginal rate of Income Tax which could be up to 45%. This is on the proviso that you have taken advice on this action. 

The second step would be to transfer your pension to an offshore pension known as a QROPS in either an EU country or Gibraltar. Ideally, you would consider transferring your pension to a QROPS in Malta which is in the EU.  The reason for Malta rather than Gibraltar is because it offers 30% tax free cash as opposed to a maximum of 25% in the UK capped at £268,725 and pensions are paid gross i.e. no tax is deducted at source. Advice from an offshore pensions/tax specialist is vital. 



The benefit of transferring your pension to a QROPS in an EU country is that such transfers are specifically exempt from the overseas transfer tax charge of 25% of the transfer value of the pension. What’s more the Lifetime allowance tax charge no longer applies to such transfers during the current tax year at least.

Obviously, it is important to take advice from an offshore pensions/tax specialist, in particular one with experience in advising on transferring pensions into overseas pensions and specifically QROPS because offshore pensions are a specialist area. If Labour win the next election and re-introduce the Lifetime Allowance tax charge they are unlikely to backdate it to the current 2023/24 tax year but they could.  If this were to happen then the Lifetime Allowance tax charge could be retrospectively applied.



Nonetheless, if you were to follow these steps and the Lifetime Allowance were not re-introduced or re-introduced and not backdated to the current tax year then potentially you could grow your pension to an unlimited amount and not face any more tax charges other than the usual Income Tax on any income you may decide to withdraw from your pension.

Certainly, the potential tax savings are substantial but it is critical to get expert advice first.  You know it makes sense.*



The value of investments can fall as well as rise. You may not get back what you invest. The information contained within this blog is for guidance only and does not constitute advice which should be sought before taking any action or inaction. All information is based on our current understanding of taxation, legislation, regulations and case law in the current tax year. Any levels and bases of relief from taxation are subject to change. Tax treatment is based on individual circumstances and may be subject to change in the future. This blog is based on my own observations and opinions.


Our Scorecards

Try out our quick and free assessments; your personalised reports will instantly be created.

Useful guides

We've created two useful documents to help you find a Independent Financial Adviser and make sure you get the most from them.

16 Questions To Ask Your Independent Financial Adviser

How to find an Independent Financial Adviser

    To download this file, please fill in your information below.