{"id":430593,"date":"2022-01-26T11:23:54","date_gmt":"2022-01-26T11:23:54","guid":{"rendered":"https:\/\/www.finder.com\/uk\/?p=430593"},"modified":"2026-01-29T16:08:27","modified_gmt":"2026-01-29T16:08:27","slug":"sipp-lifetime-allowance","status":"publish","type":"post","link":"https:\/\/www.finder.com\/uk\/pensions\/sipp-lifetime-allowance","title":{"rendered":"SIPP lifetime allowance"},"content":{"rendered":"

The pension lifetime allowance is the maximum you can build up in a pension fund before being hit with extra tax charges. The government sets the rules that affect all pension savings, including workplace and private pensions as well as self-invested personal pensions (SIPP)<\/a>. The SIPP lifetime allowance is currently \u00a31.073 million and is frozen until at least 2026.<\/p>

In this guide, we take a look at some key details you need to know about the SIPP lifetime allowance. We also see what happens if you go over your SIPP lifetime allowance and whether or not you can avoid reaching it.<\/p>

What is a SIPP lifetime allowance?<\/h3>

A SIPP lifetime allowance means you\u2019ll be hit with a hefty tax charge if your pension pot exceeds the lifetime allowance. The lifetime allowance is \u00a31.073 million in 2021\u20132022 and is frozen until 2026.<\/p>

The rules don\u2019t stop you from saving over the lifetime allowance in your pension pot. However, it makes sense for most people to keep their pension savings below the lifetime allowance.<\/p>

The lifetime allowance rules cover all types of pension, including SIPPs, workplace pensions and other private pensions. If you think you\u2019re at risk of breaching the lifetime allowance limit, you should get advice from an independent financial adviser on how to minimize your tax bill.<\/p>

How does SIPP lifetime allowance work?<\/h3>

Every time you withdraw money from your pension, you will use up part of your SIPP lifetime allowance.<\/p>

For example, if you withdraw \u00a3100,000 from your pension tax-free, this will be checked against the lifetime allowance. You will use up 9.3% of your lifetime allowance (\u00a3100,000 as a percentage of \u00a31.073 million).<\/p>

What happens if I go over my SIPP lifetime allowance?<\/h3>

If your pension pot goes over your SIPP lifetime allowance then nothing usually happens straight away. You\u2019ll need to pay an extra tax charge on the excess amount over your lifetime allowance when you withdraw your pension<\/a> or when you reach 75 years old.<\/p>

What is the lifetime allowance charge?<\/h3>

The lifetime allowance charge is based on the excess pension above your lifetime allowance. The lifetime allowance charge is currently 25% if you take your pension as income (through an annuity<\/a> or regular cash withdrawal) and 55% if you withdraw a lump sum.<\/p>

The tax charge will be collected through your pension provider when you withdraw your pension or hit 75 years old. It is in addition to any income tax charged on your pension income.<\/p>

When does it apply?<\/h3>

Your pension will be checked at the following points to see if you have breached the lifetime allowance:<\/p>