From 6 April 2012 the UK Government is reducing the Lifetime Allowance from £1.8MM to £1.5MM. The Lifetime Allowance was introduced by the UK Government in April 2006 and was a limit against which an individual’s pension was measured. In April 2006 the allowance was £1.5MM and this increased to £1.8MM by 2011. It is unclear whether there will be increases again in the future, although felt unlikely by many commentators in the next five years.
In order for you to fix your lifetime allowance to the current rate of £1.8MM, you must complete Form APSS227. The form must be received by HMRC by 5 April 2012 and cannot be emailed/filled out online.
Most people are unlikely to have current pension savings near to or in excess of £1.5MM. However, consideration needs to be given to whether you could have such savings at the time of retirement. For example, if you are in your 30s or early 40s, could your pension fund grow to such levels by the time you reach retirement?
If you already applied for “Primary Protection” or “Enhanced Protection” then it is unlikely that any action needs to be taken. Primary Protection and Enhanced Protection were available for people with pension rights pre- April 2006 (before that date no Lifetime Allowance was in place). The deadline for applying for such protection was 5 April 2009.
If you are a British expatriate, it is unlikely that you will still be contributing to your UK pension. For this reason, there are unlikely to be any real disadvantages to applying for Fixed Protection. Once Fixed Protection is applied for, in order to maintain it you must ensure you do not: (i) start a new pension arrangement other than to accept a transfer of existing pension rights; and/or (ii) make further contributions.
Other rules may also apply in particular circumstances. If any action was taken that would cause you to lose the Fixed Protection in the future, then you would need to notify HMRC within 90 days of the relevant event. Failure to do so could result in a penalty.