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Important
Changes to Lifetime Allowance from 6th April 2014
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From 6 April 2014 the lifetime allowance will be
reduced to £1.25 million. The lifetime allowance is the limit set by HMRC for
the total value of all pensions and exceeding it could result in a tax charge.
A new form of protection called fixed protection
2014 is being introduced to protect those who have built up pension pots of
more than £1.25m but no more than £1.5 million. People will be able to apply
for fixed protection 2014 from August 2013.
Fixed protection 2014 will work in a similar way to
the existing fixed protection regime introduced in April 2012. From 6 April
2014 the standard lifetime allowance will be reduced from £1.5 million to £1.25
million but with fixed protection 2014 you can fix your lifetime allowance at
£1.5 million. This means you can take pension savings worth up to £1.5 million
without paying the lifetime allowance charge. You'll have to apply before 6 April 2014 to get fixed protection
2014.
You can't have fixed protection 2014 if you already
have primary, enhanced or fixed protection. You'll 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
If you're unsure of the value of your pension
savings and don't know whether you need fixed protection 2014 contact your
scheme administrator or financial adviser. You can also use the lifetime
allowance checking tool (see the first link below) to help you decide whether
to apply for fixed protection 2014 and also individual protection 2014.
Use the second link below to apply online for fixed
protection 2014. This is the most secure route and offers the benefit of
immediate confirmation of receipt. If you haven't got a National Insurance
number you will need to apply by post.
As well as fixed protection 2014, the government
has announced that individual protection 2014 will be available when the
lifetime allowance is reduced to £1.25 million for 2014-15. Individual
protection 2014 will apply from 6 April 2014, for those with pension savings
valued at over £1.25 million on 5 April 2014.
Individual protection 2014 will give a protected
lifetime allowance equal to the value of your pension rights on 5 April 2014 -
up to an overall maximum of £1.5 million. You will not lose individual
protection 2014 by making further savings in to your pension scheme but any
pension savings in excess of your protected lifetime allowance will be subject
to a lifetime allowance charge.
You'll be able to apply for individual protection
2014 from mid-August 2014. Your application must be received by HMRC no later
than 5 April 2017.
You can hold both fixed protection 2014 and
individual protection 2014 but you can't apply for them at the same time. You
can also hold individual protection while holding either enhanced protection or
fixed protection but you can't apply for individual protection if you already
hold primary protection.
For more information on individual protection 2014
follow the link below.
Where can I get more information
Online guidance for fixed
protection – http://www.hmrc.gov.uk/pensionschemes/fp2014guidance.pdf
Individual Protection Guidance
Note - https://www.gov.uk/government/publications/pensions-individual-protection-2014
The information provided in this article is not intended to offer
advice.
It is based on In2Matrix interpretation of the relevant law and is correct at the date shown at the top of this article. While we believe this interpretation to be correct, we cannot guarantee it. In2Matrix cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained in this article.
In2Matrix (UK) Limited is an appointed representative of In2 Consulting
Limited,
which is authorised and regulated by the Financial Conduct Authority.
