Finance Bill 2024 receives Royal Assent and regulations made abolishing lifetime allowance

The Finance Bill 2024 had its second and third readings in the House of Lords on February 21, 2024. No amendments were made during these remaining Lords stages and the Bill received Royal Assent on February 22, 2024, becoming the Finance Act 2024.

The Act sets out the legal framework for the abolition of the lifetime allowance and its replacement by two new lump sum allowances.

Pensions administrators now have very little time in which to adjust their systems, processes and member communications to take account of the changes. There is concern that, despite the significant burden of introducing the new regime, it could yet be reversed depending on the outcome of the General Elections.

However, the regulations removing the lifetime allowance have now been made and come into force on April 6, 2024. They include:

• A temporary statutory override relating to rules which impose a benefit limit expressed in terms of the LTA. The override applies until April 5, 2029.
• Removal of the permitted maximum from the pension commencement excess lump sum calculation. A PCELS may now only be made once the individual has used up their lump sum allowance and their lump sum and death benefit allowance.
• The tax treatment is unchanged from previously where an individual’s entitlement to a lump sum arose before April 6, 2024, whether it is paid on or after that date.
• Reporting requirements under the new provisions.
• Changes relating to the overseas transfer allowance.

HMRC guidance on the removal of the LTA was last updated on March 15, 2024, and can be found here.