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The lifetime allowance for pension savings will reduce to £1.5 million from £1.8 million on 6 April.
Scheme members with savings of more than £1.5 million – and those who had plans to exceed the amount under expectation the lifetime allowance would not change – may be able to take advantage of fixed protection for their savings to help reduce their lifetime allowance charge.
Applications to do so must be made no later than 5 April.
Fixed protection allows the taxpayer to take benefits worth up to £1.8 million, without paying the lifetime allowance charge – although the ability to accrue benefits in the future is limited.
To receive benefits of more than the lifetime allowance the taxpayer would be obliged to have saved more than £1.5 million in money purchase pension schemes. Members of a final salary scheme would need to be entitled to a pension of either:
- £75,000 a year; or
- £65,000 a year, if the scheme makes a separate lump sum.
Benefits that exceed these amounts will attract the lifetime allowance charge.
HMRC’s Pension Schemes Newsletter 50 and Registered Pension Schemes Manual para 11101500 contain detailed information on applying for fixed protection and the implications of doing so.
