PTM174400 - Lump sum allowance and lump sum and death benefit allowance: Transitional rules for the tax year 2024-25: Enhanced protection
Source: gov.uk (2025-11-11)


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 (https://webarchive.nationalarchives.gov.uk/ukgwa/20240305022829/https:/www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm090000). If you are looking for information about the principles of lifetime allowance and benefit crystallisation events please see these pages of The National Archives (https://webarchive.nationalarchives.gov.uk/ukgwa/20240305022836/https:/www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm080000).

Enhanced protection (#Enhancedprotection) Enhanced protection: Lump sum and death benefit allowance availability (#LSDBA) Enhanced protection: Lump sum allowance availability (#LSA) Enhanced protection with separate lump sum protection (#Epwithlumpsumpro) Transfers and enhanced protection reporting (#Transfers and enhanced protection reporting)Transfers and the permitted maximum (#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 (https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm171000)) and individual lump sum and death benefit allowance (see PTM172000 (https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm172000)) protected. Individuals with enhanced protection 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 not be subject to the transitional individual lump sum and death benefit allowance arrangements (see PTM174200 (https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm174200)). The individual’s initial lump sum and death benefit allowance will be an 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 (https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/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 certification administrator, see PTM174300 (https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/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 (https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/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 (https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/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 enhanced protection reporting

Regulation 14ZC The Registered Pension Schemes (Provisions of Information) Regulations 2006 SI 2006/567

The scheme administrator of the transferring scheme must provide the scheme administrator of the recipient scheme with a statement which must specify, for each arrangement under the transferring scheme relation to the member, the amount that would be the "permitted maximum" in relation to each of the following lump sums if a lump sum of that description were paid to or in respect of a member under the arrangement:
- A pension commencement lump sum,
- A serious ill health lump sum,
- An uncrystallised funds pension lump sum,
- A defined benefits lump sum death benefit,
- A pension protection lump sum death benefit,
- An annuity protection lump sum death benefit,
- A drawdown pension fund lump sum death benefit, and
- A flexi-access drawdown lump sum death benefit.
Transfers and the permitted maximum

Where it is necessary to determine the permitted maximum in relation to a pension commencement lump sum paid after 5 April 2023 under the arrangement (known as the paying arrangement), and one or more recognised transfers were made after the post-5 April 2023 period and any sums and assets applied for the provision of the lump sum were held for the purposes of another arrangement under a different registered pension scheme (known as the predecessor arrangement) then the following applies.

The permitted maximum of a pension commencement lump sum that could have been paid on 5 April 2023 under the paying arrangement, is the maximum amount of a pension commencement lump sum that could have been piad on that date under the predecessor arrangement, less the aggregate of each pension commencement lump sum that the member has become entitled to under the paying arrangement and previously become entitled to under the predecessor arrangement.