Given the reduction in the Lifetime Allowance, those with pension funds which are likely to exceed £1.5m at retirement should consider whether to apply for fixed protection so that the old limit of £1.8m continues to apply.
As always, there are a number of factors to consider when making an election and advice should be sought. Some of the salient points are:
- If further pension contributions or benefit accruals occur after 5 April 2012, the election is voided (although a contribution could be made prior to 6 April).
- Those who previously made elections for primary protection cannot make an election for fixed protection. Those who made an election for enhanced protection can give this up before 6 April 2012 and opt for fixed protection instead.
- New pension arrangements cannot be started unless the new arrangement only receives a transfer of pension rights from an old scheme. It will, therefore, be important that those auto-enrolled into the new style all employee pension arrangements opt out before any benefit accrual happens.
If an election is to be made, form APSS227 (available on www.hmrc.gov.uk/penionsschemes/apss227.pdf) should be received by HMRC by 5 April 2012. Applications received after that date will not be accepted.