Local Government Pension Scheme

No. If underpin protection means that your pension is increased, the increase is not included for annual allowance purposes. You may still have to pay an annual allowance tax charge in the year that you retire, but this will be based on the pension you built up before the increase.

You can find out more about the annual allowance on the Tax page.

A very small number of members:

• took their pension before 1 October 2023
• were protected by the ‘old’ underpin rules
• saw an increase to their pension because of the underpin, and
• had an annual allowance tax charge in the year they retired.

If you are in this group, you may have paid too much tax, or asked your pension fund to pay too much tax on your behalf. HMRC has developed a process to deal with these overpayments. If you are affected, your pension fund will contact you.

A very small number of members:

• Took their pension before 1 October 2023
• Paid a lifetime allowance tax charge when they took their pension, and
• Will see an increase to their pension because of the new underpin rules in force from 1 October 2023.

If you are in this group, you will not need to pay another lifetime allowance tax charge because of the increase. The Government has confirmed that no-one will pay a lifetime allowance tax charge from 6 April 2023. The lifetime allowance was abolished completely from 6 April 2024.

There are still limits on the amount of tax-free cash members can take from their pension.