What Other Existing Protections Can You Avail Of Other Than Fixed Protection?

Apart from the upcoming fixed protection, there are existing protections that you can avail of to protect your pension against the introduction of the lifetime allowance – enhanced and primary protection. Primary protection will protect your pension if it exceeded the 2006/07 lifetime savings allowance figure of £1.5 million, setting it using the amount that your benefits as of 5 April 2006 exceeded this figure. Thereafter, your individual lifetime savings allowance will increase at the same rate as the standard figure.

If you register for enhanced protection, you will be protected even if your pension benefits at the time as of 5 April 2006 did not yet exceed the £1.5 million lifetime allowance but you believe they might in the future. Under this form of protection, you will not pay tax on your pension benefits in excess of the lifetime savings allowance as long as your benefits when you retire don’t exceed the value of your benefits as of 5 April 2006 as increased since then due to factors such as the rise in the cost of living or increases in your pay that qualifies for pension contributions. If you exceed your limit, you will pay taxes on the excess amount.

If you have already registered for these protections, you will not qualify to apply for fixed protection. Your existing protections will also not be affected by changes in the lifetime savings allowance. If you are making changes in your existing protections, they will not be affected by the introduction of the new protection and you can still modify them even after April 2012. If you have lost these protections or have been refused them in the past, you qualify to apply for fixed protection but will have to stop making contributions to your pension plan which will build up your benefits to more than the relevant percentage.

In addition, you may also qualify for a higher lifetime allowance if you have been making contributions to a pension plan registered in the UK but did not enjoy tax relief as you were not a UK resident at the time or you transferred pension benefits to a UK-registered pension plan from certain pension schemes based overseas. The closing date for applying for these benefits is five years after the 31st January following the end of the tax year during which the qualifying even took place. So, for example, if you transferred your benefits from an overseas scheme on April 2009 you can apply for enhanced lifetime savings allowance up to 31 January 2016.


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