It has been possible for some pension scheme members to have protection from the standard lifetime allowance, normally by qualifying for and obtaining from HMRC a higher personal lifetime allowance that replaces the standard lifetime allowance when testing their pension funds against the lifetime allowance at a Benefit Crystallisation Event (BCE).

The main forms of protection are:

 

Enhanced protection

 
  • Only available to those who had accrued pension benefits up to 5 April 2006 and from that date, had no contributions paid to any registered pension schemes and ceased active membership of any final salary/defined benefit pension schemes.
  • The pension funds of a pension scheme member with enhanced protection are not tested against the lifetime allowance, except where the member’s maximum tax-free cash lump sum entitlement in relation to all their registered pension schemes is limited to 25% of the greater of the standard lifetime allowance and £1.5 million.


Primary protection

 
  • Only available to those whose pension funds at 5 April 2006 had a total value of more than £1.5 million. It provides them with a higher personal lifetime allowance as a factor of the standard lifetime allowance up to the tax year 2010/11 and since then, as a factor of £1.8 million.
  • For example, a pension scheme member with a primary protection factor of 0.2 would have a personal lifetime allowance of £2.16 million
  • For BCEs on after 6 April 2014, the amount of primary protected lifetime allowance used up by prior BCEs wil need to be adjusted to take into account changes in the standard lifetime allowance over time. The calculation of the adjustment will depened on whether the prior BCE occurred between 6 April 2006 and 5 April 2014, or after 5 April 2014.

Where the previous BCE was on/after 6 April 2014, apply the % of lifetime allowance used at that BCE to the current standard lifetime allowance (£1,030,000 for tax year 2019/20).


Fixed protection 2012

 
  • Only available to those who had accrued pension benefits up to 5 April 2012 and from that date, had no contributions paid to any registered pension schemes and ceased active membership of any final salary/defined benefit pension schemes.
  • This gives a personal lifetime allowance of £1.8 million.


Fixed protection 2014

 
  • Only available to those who had accrued pension benefits up to 5 April 2014 and from that date, had no contributions paid to any registered pension schemes and ceased active membership of any final salary/defined benefit pension schemes.
  • This gives a personal lifetime allowance of £1.5 million.


Individual protection 2014

 
  • Only available to those whose pension funds at 5 April 2014 had a total value of more than £1.25 million.
  • This gives a personal lifetime allowance of the lower of the value of their pension funds at 5 April 2014 and £1.5 million.


Fixed protection 2016

 
  • Only available to those who had accrued pension benefits up to 5 April 2016 and from that date, had no contributions paid to any registered pension schemes and ceased active membership of any final salary/defined benefit pension schemes.
  • This gives a personal lifetime allowance of £1.25 million.


Individual protection 2016

 
  • Only available to those whose pension funds at 5 April 2016 had a total value of more than £1.00 million.
  • This gives a personal lifetime allowance of the lower of the value of their pension funds at 5 April 2016 and £1.25 million.


If at any time the standard lifetime allowance exceeds a member’s personal lifetime allowance, the standard lifetime allowance will then apply instead.

It is possible for a member to have more than one form of lifetime allowance protection.

Other forms of protection include enhancement factors in respect of pension credits received following a pension sharing order on divorce and transfers received from a qualifying recognised overseas pension scheme (QROPS).

There are currently only two types of protection that still apply but existing protection may be lost – please see the table below:

Protection Am I eligible and what does it do? Can I keep building up my pension? Other types of protection you can
hold at the same time
Other types of protection you cannot hold at the same time

Individual protection 2016

Available provided your pension savings were worth more than £1m at 5 April 2016.
Protects your LTA to the lower of:

- the value of your pension savings at 5 April 2016
- £1.25million

Yes, but when you put benefits into payment and their value exceeds your protected LTA, the excess will be subject to a tax charge.

Enhanced protection

Fixed protection 2012

Fixed protection 2014

Fixed protection 2016

Primary protection

Individual protection 2014

Fixed protection 2016

Available provided you or your employer haven't added to any of your pension schemes since 5 April 2016 and have opted out of any workplace pension scheme by 5 April 2016.

Fixes your LTA at £1.25 million

No, except in limited circumstances. If you do, you will:

- lose your Fixed protection 2016
- pay tax on any excess above the standard LTA when you put benefits into payment.

Individual protection 2014

Individual protection 2016

Enhanced protection

Primary protection

Fixed protection 2012

Fixed protection 2014

Individual protection 2016 will remain dormant until the member loses or gives up their previous protections.

Individual protection 2014 will override fixed protection 2016 but any contributions paid after 6 April 2016 will result in fixed protection being lost.

Protection for fixed protection 2016 or individual protection 2016 must be applied for online to HMRC.


For further information please see:
Pension scheme benefits and the lifetime allowance
Pensions or annuities that came into payment before 6 April 2006
What is a Benefit Crystallisation Event (BCE)?
Examples of BCE event

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