The lifetime allowance is the total capital value of all your pension arrangements, but not your state pension, which you can build up without paying extra tax.
If the value of your benefits when you draw them (not including any state retirement pension, state pension credit or any spouse’s, civil partner’s or dependant’s pension you may be entitled to) is more than the lifetime allowance you will have to pay tax on the excess.
The lifetime allowance for 2022-23 is £1,073,100. The lifetime allowance covers any pension benefits you may have in all tax registered pension arrangements – not just the LGPS.
Most people will never exceed their lifetime allowance, but if you do you will have to pay an additional tax charge on the excess above the lifetime allowance.
How do I work out the value of my pension savings to test against the lifetime allowance?
The following equation is used to work out the total value of your pension savings in the LGPS:
(Pension x 20) + Lump Sum (if applicable) + AVC Fund (if applicable) = Lifetime Allowance
For more information please visit the HMRC website:
https://www.gov.uk/tax-on-your-private-pension