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NEWS | 2012 | Clients nearing lifetime allowance advised to apply for fixed protection
Clients nearing lifetime allowance advised to apply for fixed protection

05 Mar 2012

Clients nearing lifetime allowance advised to apply for fixed protection

Due to a change in legislation, from 6 April 2012 the maximum total amount of pension savings clients may have from all registered pension schemes will be reduced from £1.8 million to £1.5 million (lifetime allowance). If pension savings are more than the lifetime allowance, clients will be liable to tax at the following rates at the time benefits are taken:

55% if the excess is withdrawn as a lump sum; or

25% if the excess is used to provide an income in retirement, which is then subject to income tax

If pension savings either exceed or are likely to exceed £1.5 million, clients should look to apply for fixed protection. If they already hold enhanced or primary protection, their fund is already protected against the lifetime allowance reduction. However, in some cases it might be more beneficial to revoke enhanced and opt for fixed protection instead. To apply for fixed protection the following conditions must be satisfied:

They do not already have either enhanced or primary protection

There is no further relevant benefit accrual or payment of contributions after the 5 April 2012

No new pension arrangements are started except to accept a transfer of existing pension rights

As no further contributions can be made under fixed protection, where clients have unused relief, they may wish to maximise their pension contributions prior to 6 April 2012. Details of the permitted maximum contribution can be obtained from Mattioli Woods. To apply for fixed protection clients should complete form APSS227 and send this to HMRC to be received by no later than 5 April 2012. If you believe this may impact yourself directly or if you are acting on behalf of a client, please contact us today.


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