Lump Sum Allowance
The maximum amount of tax-free cash you can take from your pensions over your lifetime.
The Lump Sum Allowance (LSA) is the total amount of tax-free lump sums you can take from your pensions during your lifetime. For the 2025/26 tax year, the standard LSA is £268,275. This replaced the old lifetime allowance system from April 2024. Any tax-free cash you take — whether as a pension commencement lump sum when you start drawing your pension, or as part of an uncrystallised funds pension lump sum — counts towards this limit.
There is also a separate Lump Sum and Death Benefit Allowance (LSDBA) set at £1,073,100 for 2025/26. This is a broader limit that covers both tax-free lump sums taken during your lifetime and certain lump sum death benefits paid from your pensions. If you had lifetime allowance protections in place before April 2024, you may have a higher personalised allowance that carries over under transitional rules.
Once you have used up your full LSA, any further lump sums you take from your pensions will be taxed as income at your marginal rate. It is important to keep track of how much tax-free cash you have taken across all of your pension arrangements, especially if you have multiple pots. Your pension providers should be able to tell you how much of your allowance has been used, but ultimately the responsibility for staying within the limits sits with you.