PTM174400 - Lump sum allowance and lump sum and death benefit allowance: Transitional rules for the tax year 2024-25: Enhanced protection

As of 6 April 2024 there is no longer lifetime allowance. If you are looking for information about protections, enhancement factors and the lifetime allowance charge please see these pages on The National Archives. If you are looking for information about the principles of lifetime allowance and benefit crystallisation events please see these pages of The National Archives.

Enhanced protection
Enhanced protection: Lump sum and death benefit allowance availability
Enhanced protection: Lump sum allowance availability
Enhanced protection with separate lump sum protection
Transfers and the permitted maximum

Enhanced protection 

Individuals who had certain rights on 5 April 2006 could apply to HMRC to protect them for protection from the lifetime allowance charge when those rights come into payment (crystallise) after 5 April 2006.

Individuals could claim enhanced protection regardless of their value of their pension rights at 5 April 2006. Individual’s that had valid enhanced protection were not liable to the lifetime allowance charge on any benefit crystallisation event and could not take a lifetime allowance excess lump sum. An individual could protect their pension rights plus any separate lump sum rights.

As of 6 April 2024 the lifetime allowance charge has been abolished, but an individual is entitled to have their  lump sum allowance (see PTM171000) and individual lump sum and death benefit allowance (see PTM172000) protected.

Individuals with eEnhanced pProtection that have had benefit crystallisation events (BCEs) prior to 6 April 2024 will need to consider the below information to calculate their lump sum and lump sum death benefit allowance availability prior to their first relevant benefit crystallisation event.

These transitional rules apply from the 2024-25 tax year.

Lump sum and death benefit allowance availability

Paragraph 126 Schedule 9 Finance Act 2024

Individuals with enhanced protection will are not be subject to the transitional individual lump sum and death benefit allowance arrangements (see PTM174200).

The individual’s initial lump sum and death benefit allowance will be thean amount equal to the value of their uncrystallised pension rights on 5 April 2024.

Example

Grace dies, aged 60, on 1 August 2025. A relevant benefit crystallisation event occurs on 3 September 2025 as Grace’s nominee is paid £100,000 as an uncrystallised funds lump sum death benefit.

Grace held valid enhanced protection and her uncrystallised pension rights on 5 April 2024 were worth £2,000,000.  

As of 6 April 2024, Grace’s lump sum and death benefit allowance was £2,000,000. 

The amount of the relevant benefit crystallisation event amount occurring on 3 September 2025 then needs to be deducted from this figure.

£2,000,000 - £100,000 = £1,900,000 

As of 3 September 2025, Grace has £1,900,000 lump sum and death benefit allowance remaining. 

Lump sum allowance availability

Paragraph 125 Schedule 9 Finance Act 2024

For an individual with Enhanced Protection, but no lump sum protection, their individual initial lump sum allowance will be £375,000 and they will be subject to the transitional lump sum allowance calculations (see PTM174100).

If an individual has taken less of their benefits before 6 April 2024 as tax-free lump sums than assumed under the standard transitional calculation, and the individual has complete evidence of this, they can request a transitional tax-free amount certificate from their scheme administrator, see PTM174300.

Example 1

Fabian has a relevant benefit crystallisation event on 19 June 2024. He receives a pension commencement lump sum (PCLS) of £40,000. To work out his available lump sum allowance he must first deduct a percentage of the value of any benefit crystallisation events (BCEs) that occurred prior to 6 April 2024. 

Fabian has valid enhanced protection without any additional lump sum protection.  

Fabian does not have a transitional tax-free amount certificate.  

Fabian’s lifetime allowance previously-used amount is £130,000. 

25% of this figure (£32,500) is deducted from his lump sum allowance. As Fabian has enhanced protection, this is fixed at £375,000. 

£375,000 - £32,500 = £342,500 

Fabian’s available lump sum allowance at 6 April 2024 is £342,500.  Therefore Fabian’s lump sum allowance is sufficient for him to receive the tax-free PCLS of £40,000.

The amount of the relevant benefit crystallisation event occurring on 19 June 2024 then needs to be deducted from this figure.  

£342,500 - £40,000 = £302,500 

Fabian’s remaining available lump sum allowance at 19 June 2024 is £302,500.

Example 2 

Jill has a relevant benefit crystallisation event on 29 September 2026. She receives a pension commencement lump sum (PCLS) of £50,000. Jill already has a transitional tax-free amount certificate confirming that her transitional tax-free amount is £20,000. 

The information Jill provided to her pension scheme was accurate and complete.

Jill has valid enhanced protection without any additional lump sum protection. 

Jill’s transitional tax-free amount is deducted from her lump sum allowance. As Jill has enhanced protection, this is fixed at £375,000.

£375,000 - £20,000 = £355,000 

Jill’s lump sum allowance at 6 April 2024 is £355,000. Therefore, Jill’s lump sum allowance is sufficient for her to receive the tax-free PCLS of £50,000.

The amount of the relevant benefit crystallisation event occurring on 29 September 2026 then needs to be deducted from this figure: 

£355,000 - £50,000 = £305,000 

Jill’s remaining available lump sum allowance at 29 September 2026 is £305,000. 

Enhanced protection with separate lump sum protection

Paragraph 29A Finance Act 2004

Individuals who had total lump sum rights of more than £375,000 at 5 April 2006 could notify HMRC that they intended to rely on enhanced protection for their pension rights.

These individuals, who have a valid certificate from HMRC showing the percentage of the value of the total benefits coming into payment that can be paid as a pension commencement lump sum, will have their lump sum allowance protected further.

Individuals who have enhanced protection and additional lump sum protection of £375,000 or over will not be subject to the transitional lump sum allowance calculation (see PTM174100).

In addition, as with all other individuals with enhanced protection, they will not be subject to the transitional lump sum and death benefit allowance calculation (see PTM174200).

Example

Keith has a relevant benefit crystallisation event on 4 July 2024. He receives a pension commencement lump sum (PCLS) of £150,000.

Keith has valid enhanced protection and additional lump sum protection. Since Keith has lump sum protection, he is not subject to the transitional lump sum allowance rules. His lump sum allowance is £375,000, which is the maximum amount Keith could have been paid on the 5 April 2023.

Keith has not had any other relevant benefit crystallisation events between 6 April 2024 and 4 July 2024.

Therefore, Keith’s lump sum allowance is sufficient for him to receive the tax-free PCLS of £150,000.

The amount of the relevant benefit crystallisation event occurring on 4 July 2024 needs to be deducted from Keith’s lump sum allowance.  

£375,000 - £150,000 = £225,000 

Keith’s lump sum allowance at 4 July 2024 is £225,000.

Transfers and the permitted maximum 

For information about an individual’s enhanced protection permitted maximum in the event that they have transferred providers since 5 March 2023 or 5 March 2024 please see the pension scheme newsletters.