Transitional certificate for tax-free cash

If you accessed a pension before 6 April 2024, a standard calculation will tell you how much of the new lump sum allowances you have left.

The standard calculation is based on the percentage of the old lifetime allowance you’ve already used.

*If you hold lifetime allowance protection, substitute your protected allowance for £1,073,100 above

This assumes you took 25% of the value of the pension(s) you accessed tax-free. This might be the case for most people, but doesn’t cover everyone. The rules of your pension scheme might’ve given you less than 25%, or meant that you chose to take less tax-free cash, or even none.

You can read about the lump sum allowance (LSA) and lump sum and death benefit allowance (LSDBA) in more detail below.

Read about the LSA and LSDBA

If you took less than 25% tax-free cash

In this case, HMRC will let you apply for a ‘transitional certificate’ that adjusts the standard calculation and puts you in the correct tax position. Instead of applying a straight 25%, the certificate will show the exact amount of tax-free lump sums you’ve received.

You should give this certificate to your provider the first time you want to take a lump sum after 6 April 2024. Your pension scheme will use it to work out your correct lump sum allowance.

After you die, your personal representatives can also apply for a certificate if they believe it will improve your lump sum and death benefit allowance, and the tax-free lump sum(s) that can be paid to your beneficiaries.

What you need to know

A transitional certificate might benefit you (or your beneficiaries) if, before 6 April 2024, you:

A certificate might put you in a worse position than the standard calculation if you:

Accessed a pension when the lifetime allowance was less than £1,073,100 Over 75s who have not taken all their tax-free lump sum entitlement Weren't entitled to 25% tax-free cash due to a guaranteed annuity or minimum pension rate Took less than 25% tax-free cash from a defined benefit or final salary scheme Accessed a pension credit (from a divorce) that had no tax-free cash entitlement Transferred to a qualifying recognised overseas pension Waived your right to a tax-free lump sum

Accessed a pension when the lifetime allowance was higher than £1,073,100 Took more than 25% tax-free cash because you had a protection which gave you a higher entitlement

Bear in mind that this list isn’t exhaustive, and isn’t a personal recommendation on whether you should apply for a certificate or not.

Before you apply

Please note, we can only give you a transitional certificate if you’re a member of a pension scheme administered by AJ Bell.

If you want to apply for one, you’ll need to do it before taking a lump sum for the first time after 6 April 2024 from any pension scheme, or you’ll lose the opportunity. And once you’ve been given a certificate, you must use it (and can’t give it up) even if it puts you in a worse position than before.

So it’s very important that you seek specialist advice from a qualified financial adviser if you’re thinking of applying for a transitional certificate. Though AJ Bell can give you a certificate, we can’t comment on whether you should apply or not.

When you apply

If you’re sure that applying for a certificate is in your best interests, you must provide complete evidence of particular types of tax-free lump sums you received between 6 April 2006 and 5 April 2024.

These types of lump sums are:

Your pension provider will then have three months from the date you provide the complete evidence to supply a certificate.

To apply for a certificate, please email help@ajbell.co.uk and our customer services team will send you an application form.