Lifetime allowance charge provisions of the FAS tax regulations removed for tax year 2024-25 onwards

The lifetime allowance charge provisions in the tax rules for the Financial Assistance Scheme (FAS) have been removed for the 2024-25 tax year and subsequent tax years. The change was made by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), which substituted regulation 4 of The Financial Assistance Scheme (Tax) Regulations 2010 and omitted the lifetime allowance charge provisions with effect from 18 November 2024¹.

The FAS was established by The Financial Assistance Scheme Regulations 2005, which allow payments to be made to, or in respect of, certain members or former members of certain occupational pension schemes where the liabilities of the scheme to those members have not been satisfied in full¹. The 2010 regulations set out how FAS payments are treated for income tax, and were made by the Treasury under powers conferred by section 73 of the Finance Act 2009¹.

Under the substituted regulation 4, no liability to income tax arises on a lump sum paid to an individual under regulation 17D of the Financial Assistance Scheme Regulations 2005, or on a payment made in respect of an individual under regulation 18A in the form of a lump sum¹. Where such a lump sum exceeds the permitted maximum, section 579A of ITEPA 2003 applies to the excess as it applies to any pension under a registered pension scheme¹. The permitted maximum for a regulation 17D lump sum is the lower of the individual's available lump sum allowance and their available lump sum and death benefit allowance; for a regulation 18A lump sum it is so much of the individual's lump sum and death benefit allowance as is available¹.

The 2010 regulations also provide that a transfer of the property, rights and liabilities of a registered pension scheme to the Secretary of State is treated as if it were a payment authorised by section 164(1) of the Finance Act 2004, and as a permitted transfer¹. The FAS is treated as if it were a registered pension scheme, and the FAS scheme manager as its scheme administrator¹. The Registered Pension Schemes (Provision of Information) Regulations 2006 do not apply in relation to the FAS¹.

The same source records further amendments to the 2010 regulations made by The Pensions (Abolition of Lifetime Allowance Charge etc) Regulations 2026 (S.I. 2026/698), dated 25 June 2026, which substituted words in regulation 4(4) and substituted regulation 19, in each case for the tax year 2024-25 and subsequent tax years¹.

Why it matters for households

The change affects people who receive lump sums from the FAS, the scheme that pays assistance to certain members of occupational pension schemes whose liabilities to them were not met in full¹. For the 2024-25 tax year onwards, the lifetime allowance charge no longer applies to those payments, and the tax treatment of FAS lump sums is instead framed around the individual's lump sum allowance and lump sum and death benefit allowance¹. Where a payment is within the permitted maximum, no liability to income tax arises on it; where it exceeds that maximum, the excess is treated in the same way as a pension under a registered pension scheme¹. The change took effect on 18 November 2024¹. The FAS scheme manager must provide a report to HM Revenue and Customs within three months of a payment, and information must be provided at least once in each tax year to those entitled to receive assistance¹.

What happens next

The 2010 regulations as revised record amendments taking effect on 25 June 2026 under S.I. 2026/698, for the tax year 2024-25 and subsequent tax years¹. No further steps beyond those amendments are set out in the source.