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Fixed protection for pension savings

Reduction in Lifetime Allowance (LTA)

With the Lifetime Allowance (LTA) being reduced from £1.8 million to £1.5 million in April 2012, the Government has introduced ‘fixed protection’ to help protect your pension savings from tax charges if you exceed the new limit.

Fixed protection – who should apply?

Glynn Bartley, director at Taylor Patterson’s wealth management division said: “If you have or apply for fixed protection, your LTA will be fixed at £1.8m rather than £1.5m. This protection will stop if the standard LTA rises to be more than £1.8m in the future, changing to the higher amount.” “It isn’t easy to foresee what might happen to the LTA over time, this makes it difficult to judge if your fund will grow above the threshold.” There is no one answer for individuals affected by the LTA reduction, therefore individuals should consider their own circumstances, some of which are listed in the table below, and seek professional advice before making any decisions: [table id=2 /]

What about auto-enrolment?

With auto-enrolment into pension schemes coming into force in October 2012, members with protection will have to opt out straight away to avoid revoking their protection.

When should I apply?

You have until April 5, 2012 to apply for fixed protection but you are recommended to consider your options now. Fixed protection application forms are expected to be released in mid-August 2011, once the legislation has received Royal Assent in July 2011.

Will you be affected?

If you think you may be affected by the reduction in LTA contact Taylor Patterson for further information on 01772 555073.

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