Pension Lifetime Allowance


The Spring Budget announcement about the abolition of the pension lifetime allowance could have major implications for high-net-worth individuals who are going through divorce.

The pension lifetime allowance (LTA) set a limit on the total tax-relieved pension savings a person can have over their lifetime. Once the allowance (just over £1 million) is reached an extra tax charge is levied.

Abolition of the LTA is designed to keep professionals, like doctors and consultants, working longer rather than retiring early. However, the move is also likely to result in high earners putting lots more money into their pensions.

The annual allowance – the amount that can be invested in pensions tax-free each year – has been increased from £40,000 to £60,000, an increase of 50%, and those who have already retired and drawn their pension can continue to invest in pensions up to £10,000 per year. This means people could pay up to £1.8m into their pension during their working life.

The existing lifetime allowance will remain in place until April 2024, but the tax charge will end on 3 April 2023.

Why is this important to divorcing couples?

Pensions can be valuable assets and pension sharing orders commonly form part of financial settlements when couples divorce.

A pension sharing order sets out how much of a pension an ex-partner is entitled to receive, resulting in a proportion of a pension fund being transferred out of the existing pension scheme and into a pension in the other spouse’s name.

However, abolition of the LTA opens up the potential for high earners to put more into their pension funds, while paying less tax on them, significantly increasing the projected value of the funds upon retirement.

For couples who are divorcing, this could be problematic and may require recalculation of the percentage to be shared to reflect the increased net value of pension funds and to ensure the non-pension holder doesn’t lose out.

Some couples agree not to share a large pension fund but to instead award the non-pension holder a greater proportion of other assets, for example property. This is known as ‘offsetting’.

Pension offsetting will be similarly affected by the abolition of the LTA, as the assets awarded to an ex-spouse or partner, may now not be sufficient to make up the equivalent value of their share of the pension fund.

Failure to recalculate the value of the fund without considering the abolition of the LTA could lead to the non-pension holder losing out.

What to do

These issues will affect high-net-worth people who are going through divorce or separation. It is therefore vital that you take legal and financial advice in respect of the impact of this on your situation.

If you are currently in negotiations regarding finances, speak to your solicitor about whether this affects you and whether calculations need to be revised.

If your financial consent order has already been approved, it is unlikely that you will be able to renegotiate it as it is legally binding. There are some exceptions, such as if your ex did not disclose all financial assets. If in doubt, speak to an experienced family solicitor.

If you have a family law query or would like an appointment with a member of our 5-star family law team, please don’t hesitate to get in touch by phoning our Stoke-on-Trent solicitors on 01782 205000 or our Altrincham solicitors on 0161 929 8446. Alternatively, you can email

We offer two types of initial family appointment: a standard fixed fee consultation charged at £100+vat for one hour, or a detailed Beswicks Overview appointment costing £250+vat. The Overview appointment includes a written summary of the advice given and options available to resolve your family matter.