Fixed Protection: A potential way to save £155,000 additional pensions taxation

NOTE: This post is more than 12 months old, and the information contained within may no longer be accurate.

It was reported in our Trade Press this week that HMRC are suprised over the lower take-up of Fixed Protection.

In brief, Fixed Protection will be relevant to those at, above or even close to the Lifetime Allowance, soon to be £1.5m. Due to the way Final Salary schemes are valued, this could translate into a £75,000 per annum pension; but the limit is likely less if tax-free sum lumps are taken into account.

£155,000 additional tax is at stake, and despite some industry pressure to defer the deadline, individuals have to have a form back to HMRC no later than 5th April 2012 – less than 6 weeks away. No further pension contributions should be made, with special rules applying to Final Salary benefits.

The issue is further compounded as once the lifetime allowance moves to £1.5m the government have already confirmed no increases will allowed until 2016. In effect, if an individual achieves 7% investment growth from now until 2016, they should consider Fixed Protection on funds around £1m!

Fixed Protection and the Lifetime Allowance advice doesn’t need to be complicated, and a suitably qualified professional should be able to give an indication of the advisability of applying from Fixed Protection. This is not to say it’s Black & White, but you should be able to make an informed decision.

Fixed Protection and advice around the Lifetime Allowance doesn’t need to be complicated, and a suitably qualified professional should be able to give an indication of the advisability of applying for Fixed Protection. This is not to say it’s Black & White, but you should be able to make an informed decision. Alistair Cunningham, the author of this mailshot, holds several advanced pension qualifications, is a Chartered Financial Planner and Pensions Specialist. He has won several awards, including the FT Adviser Individual Pensions/SIPP IFA of the Year 2011.

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30 Apr 2021

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