Transitional Tax Free Amount Certificates (TTFACs) are a mechanism introduced with the April 2024 pension reforms to accurately calculate remaining Lump Sum Allowance (LSA) and Lump Sum and Death Benefit Allowance (LSDBA) based on actual tax-free amounts received prior to the abolition of the Lifetime Allowance.
The Lifetime Allowance was abolished on 6th April 2024 and replaced with three new allowances:
The LSA limits the amount an individual can take as a tax-free lump sum during their lifetime, while the LSDBA limits the total amount that can be taken as a tax-free lump sum during their lifetime or as a lump sum death benefit before age 75.
TTFACs> serve to provide a more accurate calculation of an individual’s remaining LSA and LSDBA, based on the actual tax-free amounts they received prior to 6th April 2024, rather than the standard transitional calculation.
Under the standard transitional rules, the LSA is reduced by 25% of the individual’s previously used LTA. The LSDBA is similarly reduced, with special rules applying for Serious Ill Health Lump Sums, Defined Benefit Lump Sum Death Benefits, and Uncrystallised Fund Lump Sum Death Benefits.
See a worked example in our LSA and LSDBA resources.
A TTFAC allows for a potentially lower reduction in the LSA and LSDBA based on the actual tax-free amounts received by the individual before 6th April 2024.
TTFACs are available to individuals who:
It’s important to note that individuals with Enhanced Protection but no protected tax-free cash may still benefit from a higher LSA through a TTFAC.
You can use our TTFAC helper to determine eligibility
TTFACs may benefit individuals whose actual tax-free amounts received are lower than the standard transitional calculation would suggest. This is particularly relevant for those who:
Some individuals could be worse off with a TTFAC. Once issued, a TTFAC is irreversible and must be used even if it results in a poorer outcome. Therefore, careful consideration is required before applying for a TTFAC.
Pending legislation will require individuals who receive a TTFAC to notify all schemes of which they are a member.
Applications can be made by:
Applications can be made to any scheme of which the individual is a member (or was immediately prior to death).
The application must include:
Scheme administrators have three months from the date of application (including complete evidence) to either issue a certificate or refuse to issue one.
A TTFAC may cease to apply if:
In such cases, if no RBCE has occurred, a new application can be made. Otherwise, allowances should be recalculated using the standard transitional calculation.
