Your savings into the Citi Plan get really useful tax breaks that are available to help you save as much as possible, in a way that’s tax-efficient.

 

2. Tax-free allowances for when you access your savings

At any time from age 55 (57 from April 2028), you can usually take up to 25% of your retirement savings as a tax-free lump sum.

If all your retirement savings added together are (or are estimated to be) valued over £1 million, you may be taxed on anything over the amount you can take tax-free. This amount is set by the lump sum allowance (LSA) and lump sum and death benefit allowance (LSBDA), which has replaced the old lifetime allowance (LTA).

Lump sum allowance: When you take part or all of your retirement savings as a lump sum, 25% is usually tax-free unless it's more than the current lump sum allowance, £268,275. You will be charged tax at your marginal rate on any amount over the lump sum allowance.

Lump sum and death benefit allowance: The limit on all the different lump sums which are paid tax-free from your retirement savings is £1,073,100. This includes:

1. any lump sums you’ve taken which meet the limits set by the lump sum allowance
2. if you receive a serious ill-health lump sum before age 75 – this is usually payable if your life expectancy is less than a year
3. if you die before age 75 and your loved ones receive the money within two years – known as a death benefit.

Visit HMRC’s website to read more about the allowances.

3. The Lifetime Allowance

Before April 2024, if you accessed your savings from your pension, it counted towards the lifetime allowance instead. The lifetime allowance was the highest amount in your overall pension savings, including lump sum benefits payable from Citi on your death, without paying an extra tax charge when you retire or die. It was previously set at £1.073 million.

The main difference between the lifetime allowances and lump sum allowances is how they relate to your pensions:

1. the lifetime allowance applies to you when accessing your pensions.
2. Whereas the lump sum allowances only apply to any tax-free lump sums that you take either during your lifetime or after your death.

4. The Money Purchase Annual Allowance (MPAA)

If you’ve already taken pension benefits from any of your pension plans, either as a cash lump sum or as income drawdown, your Annual Allowance will reduce to £10,000 a year, no matter how much your income is.