Calculating your lifetime allowance

Calculating Your Lifetime Allowance

To calculate your lifetime allowance, you need to add together the value of all your pensions and any tax-free cash you may have taken over the years. This will give you a final amount and this is your pension’s lifetime allowance value.

You do not need to add back any income drawdowns you may have taken over the years as these are not counted towards your lifetime allowance. This is because you will have already paid income tax on the income when you withdrew it from the pension.

This results in a lifetime allowance value of £100,000.

If your pension commenced payment after April 6th 2006, you multiply the pension by just 20. For example: if you receive £4,000 a year from your DB pension, you will need to multiply this by 20.

£4,000 x 20 = £80,000

This results in a lifetime allowance value of £80,000.

In both cases, this value would be added to any SIPP or defined contribution pensions you might have, and this would form the lifetime allowance valuation.

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