‘Fixed protections’ under UK registered pension scheme tax regime — new regulations to come into force to clarify how these operate

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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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