Please note: the content on this page was updated following the publication of the Finance (No. 2) Act 2023. Furthermore, the Government has stated its intention to abolish the Lifetime Allowance (LTA) from the 2024/25 tax year. Once the details have been published, we will make the necessary updates to the page.
What is primary protection?
Primary protection was introduced in April 2006 (Pensions A-Day). This protection was introduced to protect individuals whose pensions funds were in excess of £1.5 million on 5 April 2006. 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. Individuals had to register for primary protection before 6 April 2009.
The extent to which the individual's rights valued on 5 April 2006 exceeded £1.5 million is expressed as a primary protection factor:
For example, a pension scheme member with a primary protection factor of 0.2 would have a personal lifetime allowance of £2.16 million which is calculated as:
- Standard lifetime allowance + (lifetime allowance x enhanced factor) e.g., £1.8 million + (£1.8 million x 0.2) = £2,160,000.
- Where the previous benefit crystallisation event (BCE) was on/after 06/04/2014, apply the percentage of lifetime allowance used at the BCE to the current standard lifetime allowance (£1,073,100 for tax year 2020/21).
Who was eligible for primary protection?
Primary protection was only available to individuals with total pension funds in excess of £1.5 million on 5 April 2006. Primary protection had to be applied for before 6 April 2009.
Can you hold other protections with primary protection?
Individuals with primary protection can also hold enhanced protection, but not fixed protection 2012, fixed protection 2014 or fixed protection 2016. Where an individual holds both primary and enhanced protection, the primary protection is dormant and only applies if enhanced protection is lost.
Can you lose primary protection?
Primary protection cannot be given up but can be lost in limited circumstances such as on divorce if pension savings are reduced below £1.5 million because of a pension sharing order.
What happens when you tax-free cash?
Primary protection could in some cases include a higher Pension Commencement Lump Sum or PCLS entitlement. On A-day (April 2006) the lifetime allowance was set at £1.5 million, with a standard PCLS entitlement of £375,000.
If an individual was entitled to a PCLS of £375,000, they could protect this entitlement as part of their primary protection. The protection certificate would give a protected PCLS amount as a monetary figure.
If an individual was not entitled to a PCLS of £375,000 the primary protection would not apply and the normal PCLS entitlement would apply. However, in 2014 the lifetime allowance dropped below its original value and new rules were introduced to give individuals who would be subject to the PCLS, to be at the level the lifetime allowance was in 2006 (£1.5 million), rather than the new lower standard lifetime allowance £1.2 million (2014).