Protecting your pension savings

On April the 6th 2016, the pensions Lifetime Allowance (LTA), ie the maximum level of tax-protected pensions savings that you can accrue over your lifetime, reduced from £1,250,0000 to £1,000,000. Pension savings above the LTA will be taxed at 55%.

For those whose pension arrangements are approaching or are in excess of £1,000,000, HMRC have announced the details of Protection 2016. Below is a brief explanation of the two forms of protection:

Individual Protection 2016

This will allow you to preserve your 05/04/2016 level of accrued benefit value up to a maximum of the present LTA, ie £1,250,000. Future contributions will not invalidate the protection although the benefits accrued by these contributions will not themselves benefit from protection.

Fixed Protection 2016

This will protect your pension savings from the LTA charge up to the current limit of £1,250,000, regardless of any future reductions in the LTA. However, to remain valid, no further benefits must be accrued after 05/04/2016. Thus, any pension contribution, either personally or by an employer, would invalidate the protection and your LTA would immediately reduce to the level then current.

If you would like to learn more about Protection 2016, please give us a call. HMRC will not be considering Protection 2016 applications until July 2016. In fact, there is still time for those whose pension values stood between £1,250,000 and £1,500,000 on the 5th of April 2014 to apply for Individual Protection 2014 up to 05/04/2017.

Remember that the LTA takes into account all pension funds that you may have accumulated over your working life. If you think that there is a possibility that you will be affected by the reduction in LTA and you have not already discussed the issue with Chamberlain, please do not hesitate to contact us.

12th May 2016

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