Lump Sum Allowance Calculator — Your £268,275 Cap, Tracked

The Lifetime Allowance (LTA) — the old overall cap on total pension savings — was abolished on 6 April 2024. There's now no overall limit on how large your pension pot can grow without triggering a specific charge. But two narrower caps took its place, and this lump sum allowance calculator specifically tracks the one that matters most for anyone taking cash out: the Lump Sum Allowance.

A genuinely common misconception, even among people who follow pension news reasonably closely, is that abolishing the Lifetime Allowance meant tax-free cash became unlimited too. It didn't. The lump sum allowance calculator above exists precisely because that gap in understanding is widespread, and it can lead to a genuinely unpleasant surprise at the point of actually crystallising a large pension — discovering that only £268,275 of an intended £300,000-plus tax-free withdrawal is actually tax-free, with the remainder taxed as income.

This matters increasingly for a wider group of savers than it used to, too. With pension pots having grown steadily through years of consistent contributions and investment growth, more people are crossing the roughly £1 million threshold where the Lump Sum Allowance genuinely starts to bite — not just the traditionally "wealthy" cohort the old Lifetime Allowance conversation used to focus on.

The Lump Sum Allowance (LSA) caps the total tax-free lump sums you can take across your entire lifetime, across all your registered pension schemes combined, at £268,275 for 2026/27. This figure is exactly 25% of the old £1,073,100 Lifetime Allowance — the mechanic feels familiar, but the framing has genuinely changed.

For most people with pension pots at or below roughly £1 million, this changes essentially nothing in practice — 25% of a £1 million pot is £250,000, comfortably within the cap. It starts to genuinely bite once your combined pension pots exceed around £1,073,100, at which point 25% of the total would exceed the £268,275 cap.

Alongside the LSA sits a second, broader cap: the Lump Sum and Death Benefit Allowance (LSDBA), set at £1,073,100 — identical to the old LTA figure. This one covers your tax-free lump sums plus any tax-free lump sum death benefits paid out after you die, combined. Death benefits above this cap are taxed at the recipient's marginal income tax rate, rather than affecting your own tax position directly.

Each time you take a qualifying tax-free lump sum, it reduces your remaining LSA permanently — take a £100,000 PCLS, and you have £168,275 of LSA left for the rest of your life, across any future pensions you crystallise.

If you're unsure whether you hold valid protection, or what your protected figure is, use HMRC's "Look up protection certificates" tool on GOV.UK, or contact HMRC's Pension Schemes Services directly — inadvertently breaching a protection by contributing further can be a costly mistake.

Before April 2024, exceeding the Lifetime Allowance triggered a punitive Lifetime Allowance Charge — 25% if taken as income, or 55% if taken as a lump sum. That charge no longer exists. Under the new rules, any lump sum amount above your available LSA is simply taxed as income at your marginal rate — a meaningfully gentler outcome than the old regime, particularly for higher earners.

Here's how the numbers work through a real lump sum allowance calculator scenario. A £1.5 million pension pot, no protection, no lump sums taken previously. 25% would ordinarily be £375,000 tax-free — but the LSA caps it at £268,275. The remaining £106,725 is taxed as income. At a 40% marginal rate, that's £42,690 in tax, leaving £64,035 net from the excess. Total received: £268,275 + £64,035 = £332,310, out of the £375,000 originally intended.

Now picture the same £1.5 million pot with Fixed Protection 2014 (protected LTA of £1.5m) in place. Your LSA becomes 25% of £1.5m = £375,000 — the full amount, with no excess and no tax owed at all, purely from holding valid protection.

Official sources & further reading: check current LSA and LSDBA rules at GOV.UK, look up protection certificates via HMRC, and confirm your position with a qualified financial adviser. See how this interacts with your pension annual allowance, or with our 25% tax-free lump sum guide.