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Protection Guide for Clients

With the reducing Lifetime Allowance (LA), it would appear we are about to start another regime of protection within the pension industry with some new terminology to deal with.

The LA is effectively the limit on the amount you can build up within your pension scheme in the tax favoured regime enjoyed by pensions. Once you are over this limit higher tax charges apply to your fund when benefits are taken.

It was announced in the Autumn Statement that the LA will be reducing to £1.25 million from 6th April 2014 (from the existing LA of £1.5 million). Further details of how higher amounts can be protected were outlined in the Budget 2013 but more will follow in the Finance Bill 2013 and Finance Bill 2014.

Fixed Protection 2014 will be available from July 2013. It will work in the same way as the existing Fixed Protection regime which was introduced from April 2012, when the LA was reduced to £1.5 million (from the previous LA of £1.8 million), where an individual can secure a LA of £1.5 million. However, there are limitations on applying for Fixed Protection, which will include restrictions on future contributions.

Individual Protection, will be a new form of protection, in addition to the Fixed Protection 2014, that will allow those with more than £1.25 million (as at 5th April 2014) to protect up to £1.5 million but still allow for tax relievable contributions.  Consultation on the detail of this regime will be undertaken in Spring 2013.

Those with existing A-Day enhanced or primary protection, who do not have lump sum protection, will protect their tax free cash levels at 25% of £1.5 million without having to take further action.

What should you be doing?  

For those with significant pension funds you should be contacting your financial adviser to discuss the best options for you.

Timescales to register for applying for protection need to be completed and received by H M Revenues & Customs by 5th April 2014.

Contact Kerry Houghton for further information on 01772 550773, or email


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