What is the lifetime allowance?
The lifetime allowance is a limit set by the government on the total amount you can take from all of your pensions. For 2020/21, this is is £1,073,100. When you access your pension, you 'crystallise' a portion of it – the amount you crystallise is deducted from your remaining lifetime allowance. If you reach age 75 and haven't accessed all of your pension, the amount you are yet to access will be tested against your remaining lifetime allowance. If you have had more in total than the £1,073,100 limit, you will face the lifetime allowance charge. Please remember that tax limits can change in the future.
If the excess is paid as a lump sum, HMRC will deduct 55% as a tax charge, while 25% will be deducted if you use those excess funds to provide income. If you have any form of lifetime allowance protection you may be limited in your exposure to the lifetime allowance.