What is Fixed Protection and How Can it Protect Your Pension Benefits

If you expect that your pensions will exceed the £1.5 million limitation set for the Lifetime Savings Allowance, you can protect yourself from additional tax charges by applying for ‘fixed protection’. You can apply for this protection if you currently are not under either primary or enhanced protection; you also do not need to have already built up £1.5 million in pension rights at the time you apply. Once you are accepted for fixed protection, your Lifetime Allowance will be fixed at the current figure of £1.8 million rather than the new figure of £1.5 million. However, if the lifetime savings allowance rises in future to more than £1.8 million, your fixed protection benefits will stop since your current lifetime savings allowance will then meet the higher standard.

To apply, simply download the form from the HM Revenue & Customs website and submit it to the HMRC office by 5 April 2012; applications received after this date will not be honored. Note that you will not have to provide any current or estimated future valuation of your pension funds along with your application, you simply have to confirm that you don’t have enhanced or primary protection. All applications for fixed protection will be accepted provided that the form is filled up and submitted properly and the declaration is signed. When your application has been processed and accepted, you will receive a certificate stating you have fixed protection and which you can present to your pension scheme when you are availing of your benefits. Note that if you are ever found to have broken one of the conditions, you will lose fixed protection benefits and revert to the standard Lifetime Allowance. You will also have to inform the HMRC that you have lost protection.

There are a number of conditions that you will have to adhere to if you apply for fixed protection from the increase in the Lifetime Allowance.

• You can no longer open a new arrangement other than to consent to a transfer of existing pension rights. This means that you will have to inform your employer or pension plan in plenty of time for them to stop your active membership before June 2012.


• You can no longer have benefit accrual, in which you, your employer or a third party continue to pay a contribution to the arrangement.


• You will have to accept restrictions on how and where you can transfer your pension benefits.