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

Lifetime allowance – examples

Lifetime allowance example 1 – Sarah

Sarah retires on 31 May 2021. she has not taken any pension benefits previously.

Sarah’s financial informationAmount
LGPS annual pension£25,000
LGPS lump sum£45,000
AVC taken as a lump sum£116,375
Capital value of LGPS benefits£661,375*
Example 1 – basic information

* The capital value is (20 × £25,000) + £45,000 + £116,375

The capital value of Sarah’s benefits is less than the lifetime allowance for 2021/22 of £1,073,100.

She has used 61.63% of the available lifetime allowance.

Lifetime allowance example 2 – Patrick

Patrick retires on 31 January 2022. He has not taken any pension benefits previously and he has not applied for any lifetime allowance protection.

Patrick’s financial informationAmount
LGPS annual pension £50,000
LGPS lump sum£120,000
Capital value of benefits (20 × £50,000) + £120,000£1,120,000
Excess over lifetime allowance of £1,073,100£46,900
Tax charge payable on excess£15,477*
Example 2 – Lifetime allowance tax charge

* Patrick opted to be paid the benefits in excess of the lifetime allowance as a lump sum. Tax on the lump sum is charged at 55%.

The tax payable is £46,900 ÷ 20 × 12 × 55% = £15,477.

Patrick has used 100% of the available lifetime allowance.

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