‘Fixed protections' under UK registered pension scheme tax regime — new regulations to come into force to clarify how these operate
New regulations come into force in August that make provision in relation to the tax protections available for large pension entitlements, including confirming the steps to be taken to claim a new protection.
The total amount of tax free pension benefits that can ultimately be built up by a member in their registered pension scheme(s) (‘the lifetime allowance’) was reduced from 6 April 2012 to £1.5m (from £1.8m in the previous tax year). Because there may have been members who had already accrued benefits of £1.5m or planned to do so on the basis that the lifetime allowance would not be reduced from the 2011–12 (£1.8m) level, a form of protecting that benefit accumulation was introduced called ‘fixed protection’.
In short, if a member successfully applied for this protection (the deadline for which was 5 April 2012), their lifetime allowance would be fixed at the higher of £1.8m and the standard lifetime allowance in place when they retire…
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For the tax year from 6 April 2014, the standard lifetime allowance has reduced from £1.5m to £1.25m.
One of the areas highlighted last year by the Regulator was the regulation of workplace DC pension schemes.
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