Reminder! – Deadline for Fixed Protection is 5 April 2012

March 13th, 2012

For individuals with significant pension benefits it is important to remember that the standard lifetime allowance is reducing from £1.8m to £1.5m from 6 April 2012. The standard lifetime allowance is the maximum value of pension benefits that an individual, who does not have an enhanced lifetime allowance (or enhanced protection), can accumulate without facing a tax charge.

From 6 April 2012, an individual without any lifetime allowance protection and benefits above £1.5m they will incur a tax charge of up to 55% on any amounts in excess of this threshold when they take their pension benefits – although it is possible to preserve the current lifetime allowance of £1.8m by applying for ‘fixed protection’

However, one important implication of applying for fixed protection is that (with very limited exceptions) no further benefits can accrued after 5 April 2012 so, for example, it would not be possible to make further contributions to money purchase arrangements.  Fixed protection is also not available to you if you have previously registered for primary protection

Those individuals looking to apply for fixed protection will need to complete HM Revenue & Customs form APSS227 and ensure that this is received by them on or before 5 April 2012.

Individuals who have previously registered for enhanced protection and wish to give this up in order to benefit from fixed protection must also ensure that HMRC receive their separate notice giving up enhanced protection no later than 5 April 2012.

Clearly, the decision to apply is not necessarily straightforward, particularly for those individuals who have benefits close to £1.5m who need to weigh up the advantages of preserving the higher lifetime allowance against the requirement to cease further benefit accrual.    Please contact us for financial advice if you are unsure whether the changes affect you or whether you need to take any action before the deadline.

Levels and bases of and reliefs from taxation are subject to change and their value depends on the individual circumstances of the investor