The LTA is the maximum amount of pension benefits that you can build up over your lifetime without triggering an extra tax charge.

From April 2018, there will be an increased LTA limit because it is amended each year to follow inflation. As inflation was confirmed at 3% last year, the new LTA limit will rise to £1.03 million for the 2018/19 tax year. (It’s worth noting that the LTA limit is expected to increase in the coming years).

To explain the allowance further, each time you take some of your pension benefits, you will you use up some of your LTA.

This could be when you take your pension, die or when you attain the age of 75, but once you’ve taken some of your pension fund the amount you’ve taken is tested against the LTA limit.

When your benefits, along with any other benefits you’ve taken, are over the LTA limit, an 'LTA charge' is applied. (This is only applied to the amount over the LTA limit)

The money advice service website contains more information surrounding the LTA limit but we recommend contacting an independent financial adviser before you make any final decisions regarding your Pension Investment Account.