Lifetime allowance can lead to unexpected taxes (France)


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The lifetime allowance limits how much you can hold in total pension benefits without triggering an extra tax charge of 55% or 25%.

As part of the pension reforms of 2006, the UK government introduced the ‘lifetime allowance’. This limits how much you can hold in total pension benefits without triggering an extra tax charge.

The allowance started off as £1.5m. Although it initially increased, since April 2016 it is just £1m.

Funds you have over the lifetime allowance may be taxed at 55% when you take it out or pass it on death as a lump sum. If you take this as income, or transfer to a QROPS, it is liable to 25% tax. This applies regardless of whether you are resident in the UK, France or elsewhere.

The combined value of all your pension funds (excluding state pension) count towards the allowance. Even if your funds do not yet amount to £1m, investment growth over the years may tip you over the limit.

You may have started drawing your pension but you are still not safe. Funds are assessed against the lifetime allowance on other occasions, including when you take further benefits, when you die and possibly when you reach age 75.

There are things that can be done, saving thousands of pounds, particularly if you are resident in France. Please contact Blevins Franks to discuss how we help you protect your pension savings.

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.