This is the maximum amount of pension savings that you can build up during your lifetime without having to pay a tax charge when taking the benefits.
The lifetime allowance is currently set at £1,073,100 for the 2020/21 tax year. This is due to increase in line with inflation (using the Consumer Price Index) in future years. If your overall pension savings (excluding the State Pension) are above this amount when you take the benefits you will pay a tax charge on the excess.
If you have a previous defined benefit (final salary) pension, to calculate how much of the lifetime allowance this uses up, you need to multiply the pension by 20 and add any tax-free cash you choose to take. You will then need to add this figure to the combined fund value of any defined contribution pensions you have, to work out how much of the lifetime allowance you have taken up.
You might have the option to apply to protect your benefits from the lifetime allowance, to find out more go to www.gov.uk/guidance/pension-schemes-protect-your-lifetime-allowance.