Online application for UK’s lifetime allowance protection goes live
03 August, 2016
Following the reduction of the UK’s lifetime allowance on 6 April 2016 from £1.25MM to £1MM, HMRC has now launched a new on-line self-service system to apply for Fixed Protection 2016 and Individual Protection 2016.
To access the online application system, and associated guidance, go to:
https://www.gov.uk/guidance/pension-schemes-protect-your-lifetime-allowance
The UK’s lifetime allowance is the amount of savings you can take from all of your combined UK occupational and personal pension schemes without facing a UK tax charge (which applies irrespective of the fact you are no longer a UK resident and/or taxpayer).
Since 6 April 2016 if you take more than £1MM from your combined UK pension savings, you may face a tax charge. The lifetime allowance tax charge is 55% of any amount you take from your pension savings as a lump sum that is over the lifetime allowance or 25% of any amount you take from your pension savings as pension income that is over the lifetime allowance.
Fixed Protection 2016 fixes your lifetime allowance at £1.25MM irrespective of the current value of your UK pension(s), however, you are unable to continue saving into your UK pension(s), except in limited circumstances. Individual Protection 2016 protects your lifetime allowance to the lower of the value of your pension(s) at 5 April 2016 and £1.25MM. You can continue to save into your UK pension(s), but would pay the lifetime allowance charge if your UK pension(s) exceed your protected lifetime allowance in the future.
The lifetime allowance was introduced in 2006 and was reduced in 2012 and again in 2014. Each time the lifetime allowance reduced, people who had already planned their pension savings on the basis of the higher lifetime allowance could protect their pension savings by applying to HMRC and should have received a certificate to confirm their protection. Your pension savings may already be protected and this should be confirmed before additional protection is sought. For example, if you already have what is known as Primary Protection or Enhanced Protection you cannot apply for Fixed Protection 2016.