Lifetime Allowance.

When your client’s benefits come into payment they will be tested against a ceiling known as the Lifetime Allowance. Provided the value of all of their benefits from all Registered Pension Schemes which are put into payment do not exceed the Lifetime Allowance there will be no additional tax charge.

The Lifetime Allowance for tax year 2012-2013 is £1.5 million.

Individuals could apply up to 5 April 2012 for a personal Lifetime Allowance of £1.8 million provided they registered for Fixed Protection and stopped accruing benefits and paying contributions from this date.

Protection of existing pension rights

Pension benefits earned up to 5 April 2006 that exceeded the Lifetime Allowance, or were expected to exceed the Lifetime Allowance, were able to be protected through Primary or Enhanced Protection, and thus avoid the Lifetime Allowance charge.

It was necessary for individuals to have registered for protection before 6 April 2009.

Primary Protection

This was available for individuals whose pension funds were in excess of £1.5 million at 6 April 2006.

Enhanced Protection

An individual was able to register for Enhanced Protection if their fund was below £1.5 million but they believed that the growth on their investments would take their fund above the Lifetime Allowance in force when they take benefits. Enhanced Protection will be lost if any contributions are made, resulting in a Lifetime Allowance charge being applied.

Fixed Protection

This was for clients who expected their pension savings to be more than £1.5 million when they come to take benefits on or after 6 April 2012. It was introduced for clients who had not previously applied for Primary or Enhanced Protection but may be affected by the reduction in the Lifetime Allowance from April 2012. Clients had to apply for Fixed Protection by 5 April 2012 and they must not build up benefits under any Registered Pension Scheme they belong to.

It was necessary for individuals to have registered for protection before 6 April 2012.