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For members of the Local Government Pension Scheme in England and Wales

Does a pension debit affect pension tax?

This news article was published on 21 Dec 2021

When you take your LGPS pension, its value will be assessed against the lifetime allowance. The lifetime allowance is the total value of pension savings that you can have before additional tax is payable. If your benefits are subject to a pension sharing order, the reduced value of your benefits after the pension debit has been deducted will be used.

The current lifetime allowance is £1,073,100. Most scheme members will not be affected by the lifetime allowance.

If you are a high earner affected by the lifetime allowance, a pension debit may affect any lifetime allowance protection you have.

Each year that you pay into the LGPS, the increase in the value of your benefits is measured against the annual allowance. The annual allowance is the maximum amount that your pension can increase by in a year before you have to pay extra tax. The reduction in your pension due to a pension debit is ignored in the year that the pension sharing order or qualifying agreement is applied to your benefits.

You can find out more about the lifetime and annual allowances in the Tax section.

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