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What is Fixed Protection?

Save_TaxAgility-Accountants-LondonChanges to current pensions legislation, due to come into force from 6 April 2014, are set to see a reduction in the current Standard Lifetime Allowance from £1.5 million to £1.25 million.  You can protect and fix your Lifetime Allowance at £1.5 million effective immediately through Fixed Protection 2014.

This change should be acted upon immediately if you’ve already amassed pension savings of over £1.25 million (or indeed, you expect your savings to eventually sail past this figure due to growth and interest), and you are planning on adding to any pension schemes, whether through those you’re currently involved with or through a new scheme.

Understanding Fixed Protection 2014

Fixed Protection 2014 has been introduced by the government to have your Lifetime Allowance fixed at £1.5 million effective immediately until such a time that the Standard Lifetime Allowance is raised above the £1.5 million level.

Technically you can’t apply for Fixed Protection 2014 if you already hold Primary Protection, Enhanced Protection, or Fixed Protection 2012, but in most circumstances with the help of an accountant you will be able to revoke Enhanced Protection or Fixed Protection 2012 in favour of applying for Fixed Protection 2014.

Once your application for Fixed Protection 2014 has been deemed successful, you will be able to take pension savings worth up to £1.5 million without paying the lifetime allowance charge past 6 April 2014, much as you would have been able to do before the change to the current pensions legislation. That said, under HMRC rules you will lose Fixed Protection 2014 if you:

  • have a contribution paid to any of your money purchase pension pots,
  • build up new benefits in a defined benefits or cash balance pension pot above a set amount,
  • join a new pension scheme – unless you’re only transferring pension savings from one of your existing schemes into the new scheme,
  • start saving in a new pension pot either under an existing pension scheme or a new pension scheme.

How to Apply for Fixed Protection

It should be noted that Fixed Protection 2014 isn’t something you will be automatically grandfathered into. In order to be considered HMRC must receive your application before 6 April 2014, the date of the Standard Lifetime Allowance reduction. For further information and background reading, HMRC have created a PDF on the subject.

There are numerous ways for you to apply for Fixed Protection 2014, though as always HMRC emphasises that applying online is both the most secure way of doing so, plus it offers the benefit of immediate confirmation of receipt. HMRC also note that should you choose to apply via a paper form they will not be able to confirm receipt of your form, but may be able to estimate when you’ll receive a reply.

Fixed Protection and Pension Advice

To speak with a professional to discuss Fixed Protection 2014, and the impact it could have on your pension savings, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.

 

This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.

 

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