07 October 2015

The information contained within the following news articles have been pre published. The articles were published on the dates indicated and the information contained within these issues include references to taxation, legislation, regulation and other issues or concerns that may no longer apply

Lifetime Allowance update


We have already witnessed the reduction in the annual allowance for pension contributions to £50,000, however from 6th April 2012 the lifetime allowance falls from £1.8 million to £1.5 million.  If you have previously benefited from either enhanced or primary protection this will remain in place.  However this reduction in the lifetime allowance now introduces Fixed Protection as well.


Fixed Protection can be used if you do not have either enhanced or primary protection but you do expect your pension benefits to exceed the £1.5 million limit when you crystallise (or take) your benefits.  If you hold Fixed Protection when you take your benefits (lump sum and or income) then you will not face a lifetime allowance charge on pension benefits up to a fund value of £1.8 million.


If you wish to apply for Fixed Protection you do not need to have a fund value over £1.5 million at the time of applying for the protection.  However, there are certain restrictions placed on further contributions or pension accrual for those holding Fixed Protection and therefore there is really no point in applying for this protection unless you really do expect your pension benefits to exceed the value of £1.5 million.


You will only have a short period of time to apply for Fixed Protection as the forms have only recently become available and applications need to be made to HMRC before 5th April 2012.


Even once you get Fixed Protection it can be lost if one of the following is not met


  • No new contributions to any money purchase pension schemes
  • Accrual under a defined benefit scheme must not exceed the same limits as those applied to enhanced protection
  • You must not start a new pension arrangement, unless simply transferring benefits from one scheme to another.


We will soon see auto-enrolment into the Government’s new NEST scheme (more on this in later blogs).  If you auto enrol into NEST you must opt out within 1 month or it will be considered a breach of the first rule above and you will loose Fixed Protection.


Continuing to accrue death in service benefits will not result in loss of protection as long as you do not remain an active pension scheme member as well.


If you already hold enhance or primary protection you cannot apply for Fixed Protection even though it may be more favourable in some circumstances.


As mentioned above you will be able to transfer from one scheme to another but with restrictions.  For example a money purchase scheme can only be transferred to another money purchase scheme.  Defined benefit schemes can be transferred to money purchase schemes but not all other defined benefit schemes.


Finally pension credits on divorce can result in loss of Fixed Protection, if the credit is paid to a completely new pension scheme.


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