This guide explores the Lifetime Allowance protections available for you if your pension exceeds the standard LTA. It also sheds light on historical Lifetime Allowance protections offered by the government in the past. These protections allow individuals to maintain higher LTA values.
Important: This guide won’t cover two types of historic protection – primary and enhanced. For in-depth information on these, visit https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm090000 or speak with one of our expert wealth managers.
There are three different types of Fixed Protection. Each version maintains the LTA at a certain level, depending on the type of protection the individual was able to apply for. You do not need a minimum pension value required to apply for Fixed Protection. However, you will lose protection if you make any contributions after the qualifying date, even through auto-enrolment in a workplace pension.
Fixed Protection 2012 (FP2012) provides LTA protection of £1.8 million. HMRC have closed the application period for this allowance. Making contributions after 5 April 2012 would result in the loss of protection.
Fixed Protection 2014 (FP2014) provides LTA protection of £1.5 million. HMRC have closed the application period for this allowance. Making contributions after 5 April 2014 would result in the loss of protection.
Fixed Protection 2016 (FP2016) provides LTA protection of £1.25 million. The application period for this allowance is still available for those who qualify, but individuals cannot apply if they already hold FP2012, FP2014 or earlier forms of protection such as Primary or Enhanced Protection. Protection is lost if any further contributions are made after 5 April 2016.
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There are two different types of Individual Protection that maintain the LTA at a certain level, depending on the type of protection the individual was eligible for.
Individual Protection 2014 (IP2014) provides LTA protection at the lower of £1.5 million or the value of total pension benefits as at 5 April 2014. HMRC has closed the application period for this allowance. Protection remains even if contributions are made after 5 April 2014.
Individual Protection 2016 (IP2016) provides LTA protection at the lower of £1.25 million or the value of total pension benefits as at 5 April 2016. The application period for this is still open. Protection will remain even if contributions are made after 5 April 2016, but individuals cannot apply if they hold IP2014.
Therefore, Individual Protection can be useful to those who wish to continue contributing to a pension scheme but also have the potential to retain a higher LTA than the standard level.
Fixed Protection & Individual Protection
Applying for both Fixed Protection and Individual Protection can help ensure that you have a backup plan for your Lifetime Allowance. If you lose your Fixed Protection (for example by making additional contributions to your pension), Individual Protection will step in to provide protection.
To understand how this works in practice, take a look at the example on the left.
Don’t forget to share your protection certificate(s) with your pension scheme administrator before withdrawing any benefits. They may not know about your protections otherwise and you could end up paying incorrect and/or higher Lifetime Allowance charges.
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Lifetime Allowance Guides
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