The Abolition of the UK Lifetime Allowance: What It Means for High-Net-Worth British Expats
The UK Government’s abolition of the Lifetime Allowance (LTA) in April 2024 marked a major shift in pension legislation. For High Net Worth (HNW) British expatriates, this legislative shift is not simply about lifting a tax cap. It introduces a new framework for pension planning that removes some historical constraints but also adds new layers of decision-making complexity.
Previously, the LTA imposed a ceiling on how much could be held in a pension without incurring punitive tax charges. With its removal, those charges have disappeared, creating a more favourable environment for pension accumulation and long-term growth. However, this opportunity comes with caveats.
New limits on tax-free lump sum withdrawals, evolving rules around benefit access, and inconsistent interpretations across jurisdictions mean that British expats must now reassess their pension strategies with renewed focus and clarity.
In the sections that follow, we explore five key questions every British expatriate should consider in light of the LTA’s abolition. These insights will help you determine whether your current approach remains fit for purpose and how to adapt it to safeguard and grow your wealth in this new landscape.
1. How Has the Abolition of the LTA Changed Pension Planning?
The removal of the Lifetime Allowance means there is no longer a hard cap (previously £1,073,100) on how much you can accumulate in your pension without facing LTA tax charges. However, this does not mean pensions are now tax-free. The rules around lump sums and withdrawals have changed significantly.
Key Considerations:
- New Lump Sum Allowances: From April 2024, most pension lump sums are tax-free to an amount of £268,275, unless you hold protected rights. This limit introduces a need for greater care when planning how and when to take benefits to avoid triggering unexpected tax liabilities on the excess.
- Retained Tax Charges: Although the LTA charge has been removed, withdrawals are still taxed as income, and large lump sum withdrawals may be taxed at your marginal rate. This means the structure and timing of withdrawals remain essential for maintaining tax efficiency, particularly for higher earners.
- Legacy Protections: Fixed and Enhanced Protections still offer benefits, particularly in preserving higher tax-free cash entitlements. These should be reviewed to determine whether maintaining the protection continues to provide long-term value.
- Navigating Transitional Complexity: Individuals approaching the point of accessing pension benefits should carefully evaluate how recent regulatory or financial changes may affect their existing retirement strategy, particularly where previous Benefit Crystallisation Events (BCEs) have occurred. This stage can involve a detailed review of historical pension transactions to ensure that entitlements, allowances and potential tax implications are fully understood and appropriately planned for.
2. What Investment Opportunities Now Exist Without the LTA Cap?
The end of the LTA removes a significant constraint on pension investment growth. This creates new opportunities for more growth-oriented, long-term strategies, especially for younger HNW expats who now have the freedom to pursue higher-value accumulation without fear of punitive tax thresholds. It also provides a more level playing field for globally mobile professionals to align their retirement strategy with their risk profile and market expectations.
Key Considerations:
- More Growth, Less Tax Risk: Previously, strong investment performance risked breaching the LTA. Now you can grow your pension without triggering tax charges. This opens the door to compounding gains over time, which can dramatically increase retirement income if managed prudently.
- Review Asset Allocation: With greater flexibility, it is worth reviewing your pension’s risk profile to ensure it aligns with your retirement horizon and financial goals. A more ambitious investment mix may now be suitable for those with a long time to retirement and a higher risk tolerance.
- International Multi-Currency Funds: Investing in globally diversified, multi-currency strategies, may help protect your purchasing power and align your investments with future currency needs. This strategy is particularly useful for expats planning to retire in a country where the base currency differs from their existing pension fund currency.
3. How Can British Expats Maximise Pension Efficiency Across Borders?
HNW British expats should coordinate their UK pension strategy with the tax regimes of their host countries. Without proper planning, they risk double taxation or unnecessary tax leakage, especially in jurisdictions with complex rules on foreign pensions. Tailored advice ensures you make the most of international tax treaties, optimise drawdown timings, and structure your assets to meet both UK and local compliance requirements.
Key Considerations:
- UK vs. Local Tax Treatment: Work with dual-qualified advisors to understand how your country of residence treats pension income, lump sums, and pension transfers. Tax categorisation, reliefs, and exemptions vary widely between jurisdictions, making personalised guidance essential to avoid overpayment or misreporting.
- International SIPPs and ROPS: These structures can offer improved tax treatment, currency alignment, and estate planning advantages. For example, an International SIPP can provide more flexibility for currency matching and investment access than a standard UK SIPP, while a Recognised Overseas Pension Scheme (ROPS) may offer favourable treatment for long-term non-UK residents and potential inheritance tax mitigation.
Planning for Pension Transfers?
Discover whether an International SIPP or ROPS is the right solution for your long-term goals:
Transfer of UK Pension | What's the Right Solution for You - Use of Double Tax Treaties: Tax treaties between the UK and countries like Spain and France can help avoid taxation on the same pension income in both jurisdictions. These treaties often include rules on where income is taxable, and how to apply for exemptions or tax credits to ensure fair treatment.
- Pension Access and Local Reporting: Understanding how pension withdrawals must be reported in local tax filings is critical to avoid fines or penalties. Some jurisdictions require declarations of foreign pension income annually, and errors can lead to audits, interest charges, or even legal consequences.
4. Should I Reconsider My Pension Drawdown Strategy?
For those in or nearing drawdown, the abolition of the LTA represents an opportunity to rethink how, when, and from where income is taken from pension assets. Without the LTA charge acting as a constraint, British expats now have greater freedom to shape income strategies that match both their lifestyle goals and their tax environments. However, this freedom must be used wisely, especially for those navigating the complexities of international tax systems. Importantly, proposed changes to the UK inheritance tax (IHT) regime in April 2027 also require serious consideration as part of your drawdown strategy.
Key Considerations:
- Income Tax Exposure Abroad: Drawdown income is typically taxed in your country of residence. Spain, France, Portugal, and the UAE for example all have different tax treatments for foreign pension income. Working with a dual qualified international financial planner to understand the local application of UK pension income regime and applicable exemptions can help you to avoid unintended and potentially costly tax consequences.
- Avoiding Unnecessary Lump Sums: Large lump sum withdrawals can push you into higher tax bands in your country of residence. These may also attract additional reporting obligations or tax penalties if not managed correctly.
- Tax Timing: Managing the timing of drawdowns can help mitigate tax liabilities, especially in jurisdictions with tiered or progressive income tax structures. Timing withdrawals to coincide with periods of low income or favourable exchange rates can further enhance after-tax outcomes.
- Phased Drawdown: Structuring withdrawals to remain within lower income brackets can help you to optimise your tax efficiency, especially where personal allowances are available. A phased strategy also allows for greater control over cash flow and helps preserve your capital for future needs.
It’s important to be aware however that from April 2027, the UK government is proposing to include pension assets in scope for UK inheritance tax (IHT). Your pension assets will then be assessed as part of your estate, with the value of your estate in excess of the ‘nil rate band’ (IHT allowance threshold, which is currently £325,000 per individual) being potentially liable to IHT (at the standard rate of 40%).
Careful consideration of your IHT exposure, and how this could impact the value of the assets that you pass on to your loved ones, is extremely important if you are to avoid significantly diminishing your family's inheritance, so it’s critical that your pension drawdown strategy also addresses this challenge.
In an increasingly complex and dynamic global tax environment, working with an international financial planner to stay abreast of ongoing legislative changes has never been more important – to protect your wealth and ensure that it is passed on to your loved ones in the most tax efficient and structured way possible.
5. Is My Pension Part of a Holistic Wealth Plan?
Post-LTA, pensions should be treated as part of a broader cross-border financial strategy. Coordinating pensions with investment portfolios, estate plans, and currency exposure is now more important than ever. This integrated approach helps expats avoid blind spots, ensures financial resilience, and supports long-term lifestyle and legacy ambitions.
Key Considerations:
- Set Your ‘Financial Freedom Number’: Define how much you need to retire comfortably, on your own terms. This figure helps guide investment, drawdown, and tax planning decisions throughout your expat journey.
- Balance Growth, Access, and Protection: Optimise your strategy between income drawdown, long-term growth, and wealth preservation. The right balance helps ensure liquidity without compromising future capital needs.
- Align With Succession Planning: Ensure your pensions support your estate planning goals, particularly in countries with complex succession tax regimes. Pensions can often be passed on outside of probate, making them an effective intergenerational planning tool.
- Liquidity and Lifestyle Goals: Map out your access needs for major lifestyle expenses such as property purchases, healthcare, or education funding. Identifying upcoming financial milestones helps shape the structure of your pension withdrawals.
- Nominee and Death Benefit Planning: Reviewing your pension beneficiary nominations and understanding local inheritance laws can ensure your wealth is passed on according to your wishes.
- Regular Reviews: With tax laws changing rapidly across the UK and EU, a regular review of your pension plan is essential to stay compliant and efficient. Reviews also allow for rebalancing portfolios and adapting to personal life changes such as relocation, marriage, or business sale.
Worked Example:
David, a 52-year-old British expat planning to retire in Spain, holds £1.5 million in his UK pension.
Under the previous Lifetime Allowance (LTA) regime, he faced a potential tax charge on £426,900 of his pension.
Since the abolition of the LTA, this charge no longer applies.
With advice from a dual-qualified international financial planner, David:
- Retained his Fixed Protection;
- Structured his pension drawdowns to minimise Spanish income tax, where withdrawals are taxed as income;
- Repositioned his pension into a globally diversified, euro-denominated investment portfolio aligned with his long-term retirement goals.
The outcome: tax-efficient income, preservation of capital, and greater flexibility for his future relocation to Spain.
This case study is for illustrative purposes only. Outcomes will vary based on individual circumstances and local regulations.
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I work closely with my clients to navigate the intricacies of cross-border financial planning, optimising pensions, investments, and tax planning. My holistic and client-focused approach ensures that all aspects of your financial position are considered, enabling integrated and effective strategies across UK, US, Swiss and EU jurisdictions.
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Frequently Asked Questions
Although the LTA tax charge has been removed, the amount you can take tax-free from your pension remains capped. For most individuals, the maximum tax-free lump sum is now set at £268,275 unless you hold protections that entitle you to a higher figure. Planning is essential to ensure withdrawals above this limit are managed tax-efficiently and aligned with your income needs and tax residency.
Yes, even without the LTA tax, withdrawals from your pension are still taxed as income in your country of tax residency. For expats, this means you need to understand local tax bands, available exemptions, and reporting requirements. Structuring your drawdown to minimise the effective tax rate and avoid higher brackets can make a significant difference in long-term outcomes.
It depends on your circumstances. Transferring to an International SIPP or a Recognised Overseas Pension Scheme (ROPS) can offer flexibility in currency, estate planning benefits, and potentially lower tax exposure. However, the suitability of a transfer depends on factors such as your residency status, financial goals, and expected retirement location.
With no lifetime cap limiting growth, expats have more scope to pursue higher-growth strategies. Portfolios can now include a broader range of assets, including global equities, infrastructure, and thematic funds. Diversification, currency alignment, and risk tolerance should all be factored into a revised investment strategy that reflects your long-term goals.
If you crystallised benefits under the previous LTA rules, your existing arrangements and any tax-free lump sum entitlements are preserved. However, any future benefits will be subject to the new post-LTA framework. Reviewing your protection status and understanding how your benefits are categorised is critical to avoid errors and make the most of your pension options.
This communication is for information purposes only and does not constitute financial, legal, or tax advice. All content is based on current UK legislation and is subject to change. All planning arrangements should be regularly reviewed in consideration of legislative updates. Pension regulation and tax treatment vary between jurisdictions. Any reference to UK or international pension rules is portrayed in general terms and are not intended to reflect individual circumstances. The examples provided are hypothetical and for illustrative purpose only. Outcomes will differ based on individual circumstances and local law and regulation. Pension transfers carry specific risks and may not be appropriate for everyone. The suitability of any transfers or investments should be assessed on an individual basis. Past performance is not a reliable indicator of future results. The value of investments can fall and rise, and you may not get back the amount originally invested.
Last Updated 14 July 2025
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