Fixed protection for pension savings
On 6 April 2014 the lifetime allowance for pensions will be reduced to £1.25 million from the current £1.5 million. The lifetime allowance is the amount individuals can build up in their pension fund without paying an additional tax charge. If individuals exceed the lifetime allowance when they begin to draw a pension they may be subject to a lifetime allowance charge on the amount over the lifetime allowance.
An application for ‘fixed protection’ for individuals with a pension pot which exceeds £1.25 million must be sent to HMRC before 6 April 2014. Once an application has been accepted, HMRC will issue a certificate, the reference number of which should be given by the individual to their scheme administrator.
Individuals who consider that their pension savings may exceed £1.25 million after 5 April 2014 should urgently seek advice as to whether fixed protection could help reduce their lifetime allowance charge.