## How is NHS lifetime pension allowance calculated?

Lifetime allowance charge The rate of tax charged will depend on whether you take any benefits that exceed the lifetime allowance as a pension or a lump sum. The lifetime allowance charge is: 55% if you are taking the excess as a lump sum. 25% of the capital value where you take it as a taxable pension income.

## What is NHS lifetime pension allowance?

Your Lifetime Allowance is the amount of your annual pension and lump sum you can take before you need to pay any charges to HMRC. The limit applies to everything that you save towards your pension and pension benefits, not just your NHS Pension Scheme benefits.

**What is the capital value of my NHS pension?**

1995 Section: For NHS Pension Scheme the capital value = Annual pension x 20 + lump sum. 2008 Section: For NHS Pension Scheme the capital value = Annual pension x 20 + any commuted lump sum (if you choose to have a lump sum).

**Is it better to take a larger lump sum NHS pension?**

As the method of measuring the capital value of your pension against the lifetime allowance is (pension x 20) plus your lump sum, taking a larger lump sum will reduce the overall capital value. As a result, this will reduce the lifetime allowance tax payable.

### How do you calculate final salary pension for lifetime allowance?

To calculate the total pension value for lifetime allowances, for these pensions, there’s a formula. Multiply your expected annual pension by 20 and add this figure to the amount of any tax-free, cash lump sum from that pension.

### Should I take the larger lump sum off my NHS pension?

**Is State Pension included in lifetime allowance?**

The allowance applies to the total of all the pensions you have, including the value of pensions you have through: any defined benefit (final salary or career average) schemes you belong to. any savings you have in defined contribution pensions, but excludes your State Pension; but excluding your State Pension.

**What happens if my pension goes over the lifetime allowance?**

If the total value of your pension benefits exceeds the lifetime allowance when a check is done, there will be tax to pay on the excess. This is called the lifetime allowance charge. The way the charge applies depends on whether the excess is taken as a lump sum or as income.