Since April 2024 the old Lifetime Allowance no longer caps the size of a pension pot. What remains, and what often gets missed in the same breath, is a separate limit on how much can usually be taken as tax-free lump sums: the Lump Sum Allowance.

This article is general information for people in England who are looking up pensions and retirement options. It is not personal advice. Nothing here invites you to take money from a pension, transfer a scheme, switch provider, or buy a product.

What changed and what did not

Lifetime Allowance. The Lifetime Allowance was abolished from 6 April 2024. It does not cap the size of a defined contribution pot today. Some people still have older protections that can affect how lump-sum allowances work for them. Those protections are real, but they are individual. This plain-English overview does not try to map them.

Lump Sum Allowance (LSA). There is still a standard Lump Sum Allowance. As at 15 September 2026 (tax year 2026/27) the standard LSA is £268,275. There is also a standard Lump Sum and Death Benefit Allowance (LSDBA) of £1,073,100. Sources: GOV.UK pension schemes rates and allowances; GOV.UK tax on your private pension lump sum allowance.

So, two statements can both be true at once:

  • “The Lifetime Allowance is gone.”
  • “Tax-free pension lump sums are not unlimited.”

Why people still hear “25%”

For many defined contribution pensions, the tax-free element of a lump sum is often described as up to 25% of the amount being crystallised within the available Lump Sum Allowance.

Official consumer material and MoneyHelper pages still use the percentage language because it describes how a particular payment is often calculated. The LSA sits alongside that idea as an overall allowance that can be used up over time.

In practice that means:

  • a percentage idea (often up to 25% of the relevant amount), and
  • an overall allowance (the LSA), which can stop further tax-free lump sums once it is exhausted.

If someone has already used part of their LSA, a later “25%” calculation may not deliver another large tax-free sum. The type of payment, scheme rules and any protections also matter. This article does not work individual numbers. If you need a figure for your own pots, that needs a meeting and your scheme illustrations, not something a general article can finish.

MoneyHelper’s flexible retirement income (drawdown) guidance also notes the LSA figure alongside drawdown. That is a useful cross-check against out-of-date “unlimited tax-free cash” claims, not a personal forecast.

What the LSA is not

It helps to say plainly what the allowance is not:

  • It is not a promise that you will receive £268,275 tax-free.
  • It is not a target to “use up.”
  • It is not the same as the full new State Pension. That full rate is £241.30 a week as at 15 September 2026, the full rate, not what everyone receives, and claiming depends on National Insurance record and State Pension age.
  • It is not a reason to take a pension early, delay taking it, or transfer a scheme.

Normal Minimum Pension Age (private pensions) is still generally 55 until 5 April 2028, then 57 from 6 April 2028 (HMRC Pensions Tax Manual PTM028000; protections and ill health exceptions exist). State Pension age is a different clock and depends on date of birth; the rise from 66 to 67 is phasing between April 2026 and April 2028. Reaching one age does not automatically trigger the other.

A short word on drawdown and annuities

People looking up lump sums often land next to two other labels.

  • Flexi-access drawdown (MoneyHelper): you may take a tax-free lump sum within the rules and the LSA, leave money invested, and take flexible taxable income. The pot can rise or fall. Income is not guaranteed.
  • Annuity (MoneyHelper): some or all of a defined contribution pot can be used to buy a guaranteed taxable income for life or for a fixed term.

Those are definitions from MoneyHelper. They are not a comparison of which option is better for anyone, and they are not product recommendations. “Drawdown guarantees my income” is a misconception to avoid.

Other dates people often mix up

We found no material change to in-force 2026/27 allowances since 1 September 2026. A few nearby dates still confuse searchers:

  • Cash ISA £12,000 for under-65s is from 6 April 2027, not this tax year. Overall adult ISA remains £20,000 in 2026/27. Reform regulations were still awaiting final laying at the time of writing; do not talk as if the £12,000 limit is already live.
  • Salary-sacrifice National Insurance changes for pensions are from 6 April 2029, not this year’s payroll.
  • Bank Rate was held at 3.75% (MPC meeting ending 16 September 2026; published 17 September 2026). Bank Rate is not a mortgage quote. This article does not quote average retail mortgage rates.

Those points sit beside the LSA story; they are not a call to open, fill or switch anything before a deadline.

Who this usually matters to (in general terms)

The LSA tends to become relevant when someone is thinking about taking a tax-free lump sum from a private pension, often around retirement planning, or when several pots might be accessed over time. It can also surface when people compare “what the internet said about 25%” with what a scheme illustration actually shows.

It is less useful as a dinner-table percentage and more useful as a reminder to ask: how much of any tax-free entitlement has already been used, what the scheme rules say, and what would be taxable if more cash were taken. Those are questions for scheme paperwork and, if needed, regulated advice, not for a general article to answer about you.

Auto-enrolment workplace pensions, personal pensions and older defined benefit rights can all sit in different paperwork. This piece stays at the level of the standard LSA and LSDBA figures published for 2026/27. It does not cover every payment type or every protection.

Autumn Budget 2026 is scheduled for 28 October 2026. Until then, treat 2026/27 published allowances as the in-force baseline, and treat announced future dates (Cash ISA 2027, NMPA 2028, salary-sacrifice NI 2029) as future policy, not as this year’s live payroll or ISA rules.

How to check, rather than rely on a rule of thumb

Allowances and ages change, and consumer pages sometimes lag. Sources used for this article include:

  • GOV.UK: tax on your private pension / lump sum allowance
  • GOV.UK: pension schemes rates and allowances
  • GOV.UK: Individual Savings Accounts; ISA reform 2027 factsheet / consultation
  • HMRC Pensions Tax Manual PTM028000 (normal minimum pension age)
  • GOV.UK: new State Pension; State Pension age timetable / checker
  • MoneyHelper: flexible retirement income (drawdown); annuities explained
  • Bank of England: Bank Rate; Monetary Policy Summary and minutes (September 2026)

Pension Wise / MoneyHelper can provide free guidance on defined contribution options for people who are eligible. Guidance is not regulated personal advice. If you need a personal recommendation, that is a different service from an authorised adviser, after a meeting and a full set of your details.

Craig Shilling, Octo Financial Planning Ltd. Octo Financial Planning Ltd is an appointed representative of 2plan wealth management Ltd which is authorised and regulated by the Financial Conduct Authority and is entered on the FCA register (www.fca.org.uk) under reference 972331.