Glossary

This applies to you if you reached State Pension age on or before 5 April 2016.

In addition to the basic State Pension you may have also built up an additional State Pension. Like the basic State Pension this is also based on your National Insurance contributions, but also takes into account your earnings and whether you claimed benefits. 

You will not have built up an additional State Pension while a member of a contracted-out pension arrangement.

This applies to you if you reached State Pension age on or before 5 April 2016.

The full basic State Pension for 2023/24 is £156.20 per week and for 2024/25 is £169.50 for people who have all the qualifying years of National Insurance contributions. If you do not have all the qualifying years of National Insurance contributions, you will be paid a proportion of the full amount based on the number of years of National Insurance contributions that you do have. 

The CPI is an inflation measure based on the change in the prices of a representative basket of goods and services over time.

This fixes your lifetime allowance at £1.25 million.

If HMRC received your application on or after 15 March 2023, you cannot keep building up your pensions from 6 April 2016, except in limited circumstances. It does remain possible to make a claim for Fixed Protection 2016 until 5 April 2025, providing no further contributions have been made into your pension from 6 April 2016.

If HMRC received your successful application before 15 March 2023 and you still validly hold this protection, you can continue to build up your pensions without impacting the validity of your Fixed Protection 2016 from 6 April 2023. The rules on how you can lose your protection still apply from 6 April 2016 to 5 April 2023.

Protects your lifetime allowance to the lower of:

• The value of your pension savings at 5 April 2016
• £1.25 million

You can continue building up your pension savings but you must pay a tax charge on money taken from your pension savings that exceed your protected lifetime allowance if you take your pension before 6 April 2023.

It remains possible to make a claim for Individual Protection 2016 until 5 April 2025.

The LTA used to be the overall limit on the value of your pension benefits from all sources (except the State Pension and any benefits you are receiving as a dependant) before a tax charge was applied. This was known as the ‘lifetime allowance charge’.

The LTA in 2023/24 is currently £1,073,100. However, on 6 April 2023, the tax charge was removed and any pension income relating to pensions or cash lump sums that exceed the LTA were taxed as income. The LTA may still affect the maximum one-off lump sum you can receive free of income tax when you take your benefits. The LTA will be abolished from 6 April 2024.

Click here for more information

The lifetime allowance was an overall limit on the value of your pension benefits from all registered pension schemes – and any overseas pension schemes that have benefitted from UK tax relief – before a 55% tax charge would apply, if taken as a lump sum (or 25% on the purchase of a lifetime annuity where annuity income was subject to tax). This was known as the ‘lifetime allowance charge’. The lifetime allowance charge was removed with effect from 6 April 2023. Lump sums that would previously have had a 55% tax charge applied are instead taxed as pension income of the recipient in 2023/24.

When the LTA was introduced and later when changes were made, individuals were given the opportunity to apply for protection against the LTA so that they would reduce or eliminate the effect of the lifetime allowance charge when they take their benefits.

There are four types of protection against the LTA: Primary Protection, Enhanced Protection, Fixed Protection (2012, 2014 and 2016), and Individual Protection (2014 and 2016). If you have applied for any protection, please ensure that we are made aware of this as it may affect your benefits.

An insurance policy which provides you with a guaranteed income for the rest of your life.

A single payment made at a particular time, rather than a series of smaller payments.

With effect from 6 April 2024, the LSA will be set at £268,275 as a standard (25% of the 2023/2024 LTA) and restricts the amount of lump sum that can be received tax-free when you first take your pension benefits.

With effect from 6 April 2024, the LSDBA will be set at £1,073,100 as a standard (the 2023/24 LTA). It will apply to the tax-free element of all lump sum benefits received from pension arrangements. Each time you become entitled to one of these lump sums (or a person is paid one of these lump sum benefits in the event of your death), this allowance is reduced.

The rate of tax on the next £1 of income. In the UK as elsewhere, the more you earn, the more tax you pay.

The new State Pension is a regular payment from the government that most people can claim in later life. You can claim the new State Pension when you reach State Pension age if you have at least 10 years of National Insurance contributions and are:

The new State Pension for 2023/24 is £203.85 per week and for 2024/25 is £221.20.

The sums of money you get from your pension arrangements plus any sums of money your dependants receive on your death.

Your personal allowance is the amount of income you do not have to pay tax on. The standard personal allowance is £12,570 for the 2023/24 and 2024/25 tax years.

Your personal allowance may be bigger if your spouse or civil partner claimed marriage allowance or you are entitled to blind person’s allowance. It is smaller if your income is over £100,000 or if you claimed marriage allowance in favour of your spouse or civil partner.

A registered pension scheme is a pension scheme that is registered under Chapter 2 of Part 4 of the Finance Act 2004 because either:

• An application to be registered has been made and the scheme has been registered by HMRC; or

• The scheme is treated as automatically registered

The main benefit of a pension scheme being registered is the availability of certain tax reliefs and exemptions.

Your Rothesay policy is regarded as a registered pension scheme.

The tax year runs from 6 April in one year to 5 April in the following year. For example the 2024/25 tax year is the period 6 April 2024 to 5 April 2025.