The change to the pension Lifetime Allowance (LTA) from £1.25m to £1m has been widely reported, as has the ability to be able to preserve a higher allowance either through Fixed or Individual Protection 2016.   These 2016 versions of protection,  sit alongside six other types of protection that have been accumulated since April 2006; demonstrating the success of pension simplification.

For those who have been caught out by the size of their pension savings, often those with deferred, defined benefit pensions, Individual Protection 2014 (IP 2014) could be a possible lifeline.   This seems somewhat odd, that you can take advantage of a protection that was initially introduced over two years ago.  IP 2014 allows the continued payment of pension contributions, unlike all of the Fixed Protections.  Those who had pension savings in excess of £1.25m at 5th April 2014 gain a personalised LTA equal to the value of their pension savings at that date up to a maximum of £1.5m.  Any benefits in excess of the personalised LTA will be taxed in the usual way when benefits are taken (at the point of a benefit crystallisation event) i.e. 55% or 25%. The deadline to apply for Individual Protection 2014 is 5th April 2017.

So capturing IP 2014 prior to the April 2017 deadline requires action within the next 12 months.  This will then mean you can still have pension funds in excess of £1.25m, allowing you to manage any potential LTA charge.  In addition, your tax free cash entitlement will be 25% of your personalised lifetime allowance.

Note: you cannot apply for IP 2014 if you already have Primary Protection.

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