Pension sharing and the impact on protections

The Lifetime Allowance was replaced in April 2024 by the Lump Sum Allowance (LSA) and the Lump Sum and Death Benefit Allowance (LSDBA). Pension sharing orders don’t generally affect individual allowances, but under specific circumstances they can impact people with transitional protections.

As part of our Bitesize Technical series, Senior Technical Consultant Joshua Croft looks at how pension sharing can impact protections.

Key insights on pensions sharing and the impact on protections

Primary and individual protection

Protections can’t be revoked, but may be lost if a pension debit reduces the deemed value below thresholds set on 5 April 2006 (£1.5 million for primary protection), 5 April 2014 (£1.25 million for individual protection 2014), or 5 April 2016.

Losing these protections reduces the tax-free lump sum.

Enhanced and fixed protections

Enhanced and fixed protections are unaffected by pension debits.

Since 15 March 2023, people with these protections have been able to rebuild pensions or open new ones, including to receive a pension credit, without losing the protection. 

Disqualifying pension credits

Pension credits originating from pensions already in payment are considered ‘disqualifying’ pension credits. These aren’t eligible for tax-free cash, and they don’t increase the recipient’s LSA.

More Bitesize Technical

Still hungry for more? Watch the recap on ‘Pension benefits’ with our series of 12 videos on different lump sums, drawdown options, and more.