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Lifetime Allowance Protection – The Next Round

The Lifetime allowance reduces again from 6th April 2016 to £1 million, accompanied by another round of protection. This further reduction means many more individuals will be affected and in need of advice.

There will be two new Lifetime Allowance Protections, Fixed Protection 2016 and Individual Protection 2016. There will be no application deadlines for these protections but individuals will need to apply for protection before taking their benefits since they will need the HMRC reference number if they want to rely on the protection.

HMRC is introducing a new online self-service for pension scheme members to apply for this protection and the service will be available for members to use from July 2016. Members will no longer receive a Lifetime Allowance protection certificate, instead once they have successfully applied for protection the online service will provide them with a reference number which they will need to keep.

There will be a period between the new protection regime becoming available in April 2016 and the introduction of the new online service in July 2016. HMRC will introduce an interim process for members who want to take benefits before the introduction of the online service. Members will be able to write to HMRC between April and July and HMRC will check the details of their protection and respond to the member in writing.

Fixed Protection 2016

  • Offers a protected lifetime allowance of £1.25 million
  • No minimum fund value requirement
  • Money purchase contributions must cease by 5th April 2016
  • Final Salary Schemes allow limited accrual based on CPI increases or potentially other increases covered in scheme rules
  • Not available to those with Primary or Enhanced Protection

Individual Protection 2016

  • Will be available to those with funds valued at £1m or more at 5th April 2016
  • Protects the value of the fund as at 5th April 2016 up to a maximum of £1.25m
  • Contributions and/or benefit accrual can continue
  • Not available to those with Primary Protection

Whilst there are no time restrictions in applying for the latest rounds of protection the requirement to cease accrual and valuation requirements mean that this shouldn’t make any difference to advice considerations.

Finally, members can still apply for Individual Protection 2014 to protect any pension savings built up before 6th April 2014 from the Lifetime allowance charge, (subject to an overall maximum of £1.5 million). Applications are made online and can be made up until 5th April 2017.

For further information please contact your usual professional adviser or alternatively contact Kerry Houghton on 01772 550614 or via email kerry.houghton@taypat.co.uk

 

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