The pension lump sum and death benefit allowance is £1,073,100: one cap on tax-free lump sums, counting tax-free cash, ill-health and death lump sums.
Pension Wise is free, impartial and backed by government, and covers how defined contribution pensions can be taken. Where the allowance, a protection and an inheritance meet in one decision, you can send that tangle through the form on this page, free, for an FCA-authorised adviser firm to take up.
The allowance, the figure and the law behind it
GOV.UK describes it this way: "You or your beneficiaries may be able to take a tax-free lump sum of up to £1,073,100 in certain circumstances." It gives a serious illness lump sum and certain lump sum death benefits as the examples.
The number is in the statute. Section 637R of the Income Tax (Earnings and Pensions) Act 2003 sets an individual's lump sum and death benefit allowance at £1,073,100, in a chapter (15A) that Schedule 9 to the Finance Act 2024 substituted for 2024-25 onwards. Section 637S then sets out how much is left when a payment is made.
Two points follow from the way section 637S is written. The allowance belongs to the individual whose pension it is, not to one scheme, and it is used up over time rather than topped up each year: what is left is the allowance minus the aggregate of the tax-free amounts from every earlier qualifying payment, and it can reach nil. Only events on or after 6 April 2024 are counted under the section itself.
It sits above a smaller figure. The lump sum allowance of £268,275 (section 637P) caps ordinary tax-free cash; how that works, and why it is shared across pensions, is in the tax-free lump sum guide and the page on lump sums from two pensions. What replaced the old lifetime allowance is told in the lifetime allowance guide.
What counts against it
Section 637S names most of the payments that use the allowance, and HMRC's Pensions Tax Manual (PTM173000) adds the stand-alone lump sum. The table sets them beside the smaller allowance, using GOV.UK's lists and the manual.
| Payment | Uses lump sum allowance (£268,275) | Uses lump sum and death benefit allowance (£1,073,100) |
|---|---|---|
| Pension commencement lump sum | Yes | Yes |
| Uncrystallised funds pension lump sum (the tax-free part) | Yes | Yes |
| Stand-alone lump sum | Yes | Yes |
| Serious ill-health lump sum | No | Yes |
| Lump sum death benefits, except charity and trivial commutation lump sums | No | Yes |
Every pound of tax-free cash also reduces the larger allowance: GOV.UK says whatever uses up the lump sum allowance is counted against the lump sum and death benefit allowance as well. A person who used all £268,275 as tax-free cash has less left for their ill-health lump sum, or for the beneficiaries.
Some things are outside the count. An unauthorised payment is not a qualifying event, and HMRC's manual says a lump sum death benefit paid in respect of rights that were crystallised before 6 April 2024 is not one either. Income paid out of a drawdown fund or an annuity is not a lump sum; GOV.UK lists it in a separate row of its table, which the inherited pension tax guide goes through. For the two lump sums that lean on this allowance most, see the ill-health pension guide and pension death benefits.
What happens above the allowance
The test is against the allowance still available when the payment is made, not the full £1,073,100: HMRC's manual says any amount above what is left is subject to an income tax charge, and "the excess of the lump sum will be subject to income tax at the recipients marginal rate". It is the rate of whoever receives the payment. GOV.UK adds that the provider takes the charge off before paying.
For a death before 75, GOV.UK says the person dealing with the estate must tell HMRC when lump sum death benefits pass the allowance of the person who died; it also says a lump sum paid more than 2 years after the provider is told of the death is taxed in full. If a pension was left to you, what you may owe on the excess, and what to do if tax was taken in error, are on the inherited pension tax guide. How an excess would sit on top of your other income in a given year depends on your own numbers; an adviser firm with FCA authorisation can look at those through the form on this page.
Protections that raise the allowance
In HMRC's manual, protections lift both allowances above their standard figures of £268,275 and £1,073,100, and from 6 April 2024 someone with a valid protection keeps it for both. Those listed are primary protection, enhanced protection, fixed protection (2012, 2014 and 2016) and individual protection (2014 and 2016), plus pension credits on divorce and some international cases. A member relying on one gives the scheme administrator the reference number HMRC issued for it, which for the older protections is on the certificate. How each protected figure is worked out is explained at primary, enhanced, fixed and individual protection.
The allowance can also be lower. GOV.UK says both allowances may be reduced if you had an eligible job such as professional sport, dance or modelling, joined your scheme before 2006 and take a lump sum before 55; it is not reduced in a scheme for uniformed services such as the armed forces, police and fire services.
Working out how much is left
GOV.UK's advice is to ask your provider how much of each allowance you have used, and to add up the use in all the schemes you belong to. HMRC's manual says how a scheme finds out is not set by legislation, and that if a member gives no information the administrator will assume no allowance is available, which is why a record of each tax-free payment helps.
If you took benefits before 6 April 2024, transitional rules decide the starting figure for your first qualifying event after that date. Some people can instead rely on a transitional tax-free amount certificate, which sets the figure for both allowances; who qualifies and the deadlines are on the lump sum from two pensions page, and in HMRC's PTM174300.
A worked example, calculated 20 October 2026
This is our own arithmetic for illustration, with no protection, no transitional adjustment, no earlier lump sums other than those stated, and a death before 75 with payment inside the two years. Someone who has taken the whole £268,275 lump sum allowance as tax-free cash has £1,073,100 - £268,275 = £804,825 of the lump sum and death benefit allowance left. If a lump sum death benefit of £150,000 is then paid on their death, £804,825 - £150,000 = £654,825 is left. Had £900,000 been paid instead, £900,000 - £804,825 = £95,175 would sit above the allowance and be taxed at the recipient's marginal rate. HMRC's manual gives a simpler case of its own, a £100,000 lump sum death benefit paid for a man who died at 72 with no other events.
Questions about the allowance
Is there a calculator for the pension death benefit allowance?
GOV.UK's route is to ask each provider how much has been used. The sum itself is a subtraction of earlier qualifying payments, as the example above shows; gathering the figures from every scheme is the hard part.
Does a SIPP have its own lump sum and death benefit allowance?
No. The allowance belongs to the individual, and GOV.UK says you must add up the use in all the pension schemes you are in, so a SIPP's tax-free cash and any lump sum paid from it count towards the same total.
Does the allowance apply to beneficiary drawdown?
The allowance is about lump sums. When a drawdown fund is paid out in one payment, GOV.UK counts a flexi-access drawdown fund among the lump sum death benefits. Regular income taken from it falls under separate tax rules, set out in the inherited pension guide.
Does the allowance change when I reach 75?
Section 637R sets a single figure with no age attached. What does change at 75 is how a death lump sum is taxed, which the page on pensions after 75 and the inherited pension guide explain.
Your next step
The allowance is a single lifetime total that includes tax-free cash already taken, and some pots and protections make it hard to read. To see where your own total stands, write down each pot and any protection reference on the form on this page. You pay nothing, and an adviser firm that holds FCA authorisation phones you.
Sources, read 20 October 2026: GOV.UK, Lump sum allowance and Tax on pension death benefits; legislation.gov.uk, ITEPA 2003 s637R, s637S, s637P; HMRC Pensions Tax Manual, PTM172000, PTM173000, PTM174200, PTM174300, PTM176100; MoneyHelper, Pension Wise (archived copy, 28 September 2026).