Pension protection - Individual Protection of the Lifetime Allowance in 2014

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The government have announced that Individual Protection 2014 will be available when the lifetime allowance reduced to £1.25 million for 2014-15. Individual Protection 2014 operates from 6 April 2014, for those with pension savings valued at over £1.25 million on 5 April 2014.

The concept of a lifetime limit was established in 2006 which set the maximum figure for tax-relieved savings in the fund(s) and has to be considered when key events happen such as when a pension is taken for the first time.  The limit is reduced from 6 April 2014 and so some further protection measures have been allowed at the same time.  A tax charge is made on any excess over the lifetime allowance limit. The tax rate depends on how the excess is paid, as follows:

  • lump sum - the rate is 55%

  • pension - the rate is 25% (in addition to the normal income tax liability)

Individual Protection 2014 gives a protected lifetime allowance equal to the value of the client's pension rights on 5 April 2014 - up to an overall maximum of £1.5 million. Individual Protection 2014 will not be lost by making further savings in to a pension scheme but any pension savings in excess of the protected lifetime allowance will be subject to a lifetime allowance charge.

Clients can now apply for Individual Protection 2014 and applications must be received by HMRC no later than 5 April 2017.

Clients can hold both fixed protection 2014 and individual protection 2014.They can also hold individual protection while holding either enhanced protection or fixed protection but you can't apply for individual protection if you already hold primary protection.

As with all such tax situations, advice should also be sought before proceeding.  For further details call Alan Boby on 01295 250401 or email

Alan Boby

Ellacotts LLP


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