Transitional Tax Free Amount Certificates (TTFAC)

Introduced as part of the abolition of the lifetime allowance (LTA) on 6 April 2024, you can find information about TTFACs below.


What is a TTFAC?

From 6 April 2024, the pension lifetime allowance has been abolished. There is a new lump sum allowance (LSA) of £268,275 which limits the amount most people can take as a tax-free lump sum during their lifetime. There is also a new lump sum and death benefit allowance (LSDBA), which is £1,073,100 for most people which limits the amount that can be taken as a tax-free lump sum during their lifetime or following death before age 75.

For those individuals who had taken some benefits before 6 April 2024, a transitional calculation is provided so that individuals can calculate their available LSA and LSDBA. Normally the LSA and LSDBA is reduced by 25% of the individual’s previously used LTA, although special rules apply where a serious ill-health lump sum was paid before 6 April 2024.

However, individuals with complete and accurate records of the monetary value of tax-free amounts previously received may request that their scheme use this evidence to produce a TTFAC instead of automatically deducting 25% of the individual’s previously used LTA.

This information is our interpretation of the HMRC regulations and gives examples of clients who may or may not benefit from applying for a TTFAC. This should not be taken as financial advice.

Examples of clients who may or may not benefit from applying for a TTFAC

How to obtain a TTFAC

An individual, or a personal representative, can apply for a TTFAC from a registered pension scheme where the individual is a member or, if the individual is deceased, of which the individual was a member immediately before death. They will need to provide complete evidence of any lump sums or lump sum and death benefits in respect of any pension the client has been a member of.

The scheme administrator will use this evidence to determine the client’s transitional lump sum tax-free amount and transitional lump sum and death benefit tax-free amount and issue a certificate, or decline the application. The scheme administrator has three months from the date of the application to review the evidence and provide a response.

Important things to note before applying

The way the legislation is written means a certificate can give a worse outcome than the standard transitional basis. HMRC have said that once a client receives a certificate, it is irreversible and they must use it even if it is a poorer outcome. Therefore, care needs to be taken before making a request. Nucleus are not liable if the production of a transitional certificate results in a poorer outcome. We can only produce a certificate for individuals who have benefits in a Nucleus pension scheme.

A TTFAC can only be applied for if no relevant benefit crystallisation event has taken place after 6 April 2024.

HMRC have published a tool for members to check if they can apply for a transitional tax-free amount certificate from their scheme. Please be aware that HMRC’s tool will not cover all client scenarios.