QROPS

QROPS and the Lifetime Allowance Abolition: What Changed in 2024

By QROP Direct Editorial Team · Reviewed by an independent regulated pension specialist · Reviewed 2026-06-10

QROPS and the Lifetime Allowance Abolition: Reassessing the Case for Overseas Transfers

For over a decade, one of the most compelling arguments for transferring a UK pension to a QROPS was the ability to take the pension fund outside the UK's Lifetime Allowance (LTA) regime. The LTA — the maximum pension savings that could be built up over a lifetime without triggering a significant tax charge — had been frozen since 2021 at £1,073,100, making it increasingly relevant for higher-value pension savers.

Then, in the Spring Budget 2023, the UK government announced the abolition of the LTA with effect from 6 April 2024. The change, enacted through the Finance (No.2) Act 2023, removed the LTA charge entirely and replaced the LTA with two new, more limited allowances. This was one of the most significant changes to UK pension tax in a generation — and it materially altered the landscape for QROPS planning.

This guide explains exactly what changed, what the new allowances mean, how they interact with QROPS, and whether QROPS remains a worthwhile consideration for UK expats in 2026.

This guide is for information purposes only and does not constitute financial, tax or legal advice. Always consult a regulated adviser before acting.

Key Takeaways

• LTA abolished from 6 April 2024: There is no longer a cap on how large a UK pension fund can grow without incurring a tax charge.
• Replaced by two new allowances: The Lump Sum Allowance (£268,275) and the Lump Sum and Death Benefit Allowance (£1,073,100) now apply.
• The LTA argument for QROPS transfers is gone: Transferring to a QROPS specifically to escape LTA charges is no longer a valid reason — the charges no longer exist.
• QROPS may still be appropriate for other reasons: Currency planning, jurisdiction tax advantages, estate planning, and long-term non-return to the UK remain relevant considerations.
• The OTC change added a new cost: The removal of the EEA/Gibraltar OTC exemption from October 2024 increased the upfront cost of QROPS transfers, further narrowing the scenarios where they make sense.
• Retained LTA protections still matter: Those with Fixed or Individual Protection against the old LTA must take specific advice on how 2024 changes interact with their protection.

The Old Lifetime Allowance: Why It Drove QROPS Transfers

Under the pre-2024 regime, pension savings above the LTA were subject to a "lifetime allowance charge." The charge was: - 25% if the excess was taken as income (on top of income tax, creating an effective double-tax penalty) - 55% if the excess was taken as a lump sum

This created a powerful incentive for higher earners to keep pension savings below the LTA. One common approach was to transfer to a QROPS — the theory being that once outside the UK's registered scheme framework, the fund would escape the LTA on future growth.

However, this strategy was not as clean as often presented. During the 10-year QROPS reporting period, certain benefit payments remained tested against the LTA. The true LTA escape only became complete after the 10-year window expired. Nonetheless, the LTA argument was widely used in QROPS marketing, particularly for those with rapidly growing pension funds.

What Changed from April 2024

The Finance (No.2) Act 2023 abolished the LTA charge from 6 April 2024 and replaced the LTA framework with two new allowances (Source: HMRC Pensions Tax Manual, gov.uk, 2026):

The Lump Sum Allowance (LSA): £268,275

The LSA governs the total amount of tax-free lump sums that can be paid from UK-registered pension schemes over a person's lifetime. It applies to: - Pension commencement lump sums (the "25% tax-free cash" taken when you first access your pension) - Serious ill-health lump sums - Uncrystallised funds pension lump sums (UFPLS) — the tax-free element

The LSA is set at £268,275, which is exactly 25% of the old LTA (£1,073,100). For most people, this means the amount of tax-free cash available has not changed in practice — those with funds up to around £1.07 million will still be able to take 25% of their fund tax-free.

Only those with funds significantly above £1,073,100 will notice a reduction in available tax-free cash compared with the old rules.

The Lump Sum and Death Benefit Allowance (LSDBA): £1,073,100

The LSDBA applies to: - The tax-free element of serious ill-health lump sums - Lump sum death benefits

It sets the maximum total of these payments that can be made without income tax applying. The LSDBA mirrors the old LTA amount, preserving the position for most pension savers regarding death benefit planning.

What the Changes Mean in Practice

For most pension savers with funds up to £1 million: - No practical change: The 25% tax-free cash entitlement is preserved under the LSA. - No LTA charge risk: Pension funds can grow beyond £1,073,100 without any penalty. - Death benefit planning: Broadly preserved under the LSDBA.

For high-value pension savers (funds above £1.5–2 million): - Tax-free cash capped at £268,275: Even if the fund grows very large, the maximum lifetime tax-free cash is fixed at £268,275. - No charge on fund growth: The removal of the LTA charge means large pension funds no longer face a 55% penalty on excess — the excess is simply taxable as income when drawn.

How the LSA and LSDBA Apply to QROPS

During the 10-year QROPS reporting period, lump sums paid from a QROPS are tested against the member's remaining LSA and LSDBA. This means (Source: HMRC Pensions Tax Manual, gov.uk, 2026):

• A pension commencement lump sum paid by a QROPS within 10 years of transfer uses up part of the member's LSA.
• A lump-sum death benefit paid from a QROPS within 10 years uses up part of the LSDBA.
• Any amount exceeding the member's remaining allowance is subject to UK income tax.

After the 10-year reporting window expires, LSA and LSDBA rules no longer apply to QROPS payments. The scheme is governed entirely by its jurisdiction's rules.

This is a meaningful planning point: if you intend to take a significant lump sum from your QROPS, the timing relative to the 10-year window matters for UK tax purposes.

Does QROPS Still Make Sense Post-LTA Abolition?

The honest answer is: less often than before, but still sometimes yes. The LTA was a major driver of QROPS transfers; its removal eliminates one of the primary justifications. Combined with the October 2024 removal of the EEA/Gibraltar OTC exemption, the circumstances in which a QROPS transfer is clearly advantageous have narrowed considerably.

When QROPS may still be appropriate:

1. Permanent emigration to the same country as the QROPS: If you are tax resident in the QROPS jurisdiction (satisfying the OTC exemption), the transfer can be OTC-free and the overseas framework may offer genuine tax advantages in that jurisdiction.

2. Estate planning objectives: Some QROPS jurisdictions offer inheritance tax advantages or specific death benefit structures not available in a UK SIPP.

3. Currency and investment flexibility: A QROPS can be a more natural vehicle for long-term non-UK residents who want their pension denominated and invested in their currency of retirement.

4. Jurisdiction-specific tax advantages: In countries where the QROPS jurisdiction's rules interact favourably with local tax — for example, where pension income from certain overseas schemes is taxed preferentially — a QROPS may provide ongoing tax savings that justify the transfer costs.

When QROPS is unlikely to be the right choice:

• If the primary reason was LTA avoidance (no longer applicable)
• If you are in a DTA country with low/moderate tax where an International SIPP provides adequate tax efficiency
• If you plan to return to the UK (within the 10-year window, a return could trigger OTC or other charges)
• If the OTC (25%) would apply and the projected tax savings cannot recover that cost

Our QROPS benefits and risks guide and QROPS vs International SIPP comparison explore these trade-offs in full.

Protected Allowances: Those with Fixed or Individual Protection

Before the LTA abolition, HMRC offered various forms of "protection" to individuals who had built up pension savings above the LTA before it was reduced. These protections preserved higher LTA limits for those individuals. Common forms included:

• Fixed Protection 2016: Preserved an LTA of £1.25 million
• Individual Protection 2016: Preserved the value of savings at 5 April 2016, up to £1.25 million

From 6 April 2024, these protections interact with the new LSA and LSDBA regime in specific ways. In some cases, those with protection have enhanced LSA entitlements above £268,275 (up to £268,275 × the protection factor). The exact calculation depends on the type and level of protection held (Source: HMRC Pensions Tax Manual, gov.uk, 2026).

If you hold any form of LTA protection and are considering a QROPS transfer, specific advice on how your protection interacts with both the new allowances and the QROPS framework is essential.