Individual protection from the lifetime allowance: what are the features and implications of IP14?
Another reduction in the lifetime allowance, scheduled for April 2014, means another round of protections. The forthcoming reduction in the lifetime allowance (LTA) will mean that people who have planned their retirement savings by reference to the current £1.5m LTA will need some form of transitional protection in recognition of that planning.
December 2012 saw the announcement that the LTA would be reduced from £1.5m to £1.25m, with effect from 6 April 2014 (the annual allowance will also be reduced on that date to £40,000). This forthcoming reduction in the LTA prompted the announcement that ‘fixed protection 2014’ would be introduced. Under fixed protection 2014, the individual concerned will have an LTA of £1.5m, but will lose that protection if there is any benefit accrual on or after 6 April 2014.
The possibility of a further form of protection was confirmed in last year’s Budget. Following discussions with the pensions industry, a consultation paper issued by HMRC and the Treasury set out how a new individual protection would join the existing suite of protections from the LTA. Last month, HMRC published its response document as well as guidance for scheme administrators and draft legislation (in the form of the Finance Bill)…
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