Lifetime Allowance Protection

Lifetime Allowance Protection

There are two forms of pension lifetime allowance protection that are designed to help you when it comes to the pension lifetime allowance.

Individual Protection

This type of protection allowed you to protect the value of your pension at the point the lifetime allowance was reduced. This last happened in 2016 when the allowance was reduced from £1.25 million to just £1 million. If your pension exceeded the £1 million at this point, you could have applied for individual protection to protect your pension against the new lower rate of £1 million.

For example, if your pension value was £1.2 million on April 5th 2016 and you applied for individual protection, your lifetime allowance would be fixed at £1.2 million. It is possible to backdate the application. However, the value on April 5th 2016 would still need to be used. You cannot use today’s value and apply for individual protection in 2016.

Fixed Protection

This type of protection allowed you to lock in the current value of the LTA before it went down so that your pension funds could grow to this amount in the future.

For example, if your fund was worth £800,000 on April 5th 2016 you could apply for fixed protection of £1.25 million. This would allow your pension to grow to the higher amount of £1.25 million in the future.

There is one caveat though. Your pension cannot receive any further contributions from either you or your employer from the date of the protection, in this case, April 5th 2016. If the pension does receive a further contribution it would void the protection and you would default back to the standard lifetime allowance.

As with individual protection it can be backdated. But you need to be sure that the pension has not received any contributions since the date of the post-dated protection application.

Applying for protection is relatively easy. By following the link below, you will be taken to a government online portal where you can apply online. Your protection certificate will be sent to you via email.

For further help understanding if pension protection might be right for you feel free to contact a member of our lifetime allowance protection team and we will be happy to help.

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