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TonyTax
TonyTax, Tax Consultant
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I have accumulated a pension fund of approx. £1.1m in an NHS

Resolved Question:

I have accumulated a pension fund of approx. £1.1m in an NHS final salary scheme. I understand the LTA is reducing from £1.5m to £1.25m on 5 April. I am unsure whether to apply for fixed protection which I understand can be applied for to retain the £1.5m allowance. If I apply, would I still be able to pay into the pension scheme until it reached £1.5m rather than £1.25m? Also what would the tax implications be if I exceeded the £1.25m LTA?
Thank you.
Janet
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.

Hi.

Can you confirm that as at 5 April 2006, you had not built up pension savings of more than £1.5 million? Have you applied to HMRC for any protections (primary, enhanced or fixed protection) at all in relation to your pension funds since 2006? If so, which?

Customer: replied 3 years ago.

I can confirm that, as at 5 April 2006, I had not built up pension savings of more than £1.5million. My current pension savings, as estimated by the pensions agency are approx £1.1m and I have no other pension savings. I have not applied for any protection at all before this time. I was sent a letter by the pensions agency indicating that the level of my pension savings may lead to me being affected by the reduction in the LTA as my expected total pension may be in excess of £54347, plus a lump sum or £62,500 without a lump sum. It also stated that the reduction in the LTA creates a transitional issue if you have already built up a pension pot which exceeds the LTA of £1.25m. Thus, I am unclear as to whether to apply or not as the letter also states that "if you have FP2014, you will have to stop accruing pension benefits under every registered pension scheme that you belong to by 5 April 2014." It would seem, therefore that I would need to come out of the scheme if I applied for FP2014, which I would be reluctant to do at this stage, as my current pension would be around £43,500 if I came out of the scheme now. I had hoped that I could apply for protection and then continue to pay into the scheme until my pension pot reached £1.5m but not sure if that is allowed?


Hope this provides the necessary info.


Many thanks.

Expert:  TonyTax replied 3 years ago.
Thanks.

Leave this with me while I draft my answer.
Expert:  TonyTax replied 3 years ago.

Hi again.

Take a look at the HMRC notes on the lifetime pension allowance here as part of this answer.

As you appear not to have applied for any of the previous protections, the only options open to you are to do nothing in which case your protected pension savings will be limited to £1.25 million or to apply for Fixed Protection 2014 to protect up to £1.5 million of your pension savings. You need to do this by 5 April 2014 and you can do this online here. You cannot apply for Individual Protection 2014 as your pension savings are unlikely to be worth over £1.25 million at 5 April 2014. Use the lifetime allowance checking tool here to confirm your options.

If you do apply for Fixed Protection 2014, it will restrict your future contributions which you can read about on page 5 here. You should consult your pension scheme managers for specific contribution figures.

 

You can read about the tax implications for pension savings in excess of the lifetime allowance on page 4 here.

I hope this helps but let me know if you have any further questions.

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