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Fixed protection 2012
Fixed protection 2012 allowed investors to keep a lifetime allowance of £1.8m when the standard lifetime allowance dropped to £1.5m on 6 April 2012. If the standard lifetime allowance increases above £1.8m in the future, fixed protection 2012 will cease to apply and the investor will be entitled to the higher allowance. Any individual could apply for fixed protection 2012, as long as they didnít already hold primary or enhanced protection. Your client will lose fixed protection 2012 if any contributions are made to their pensions after 5 April 2012, or if their benefit accrual in a defined benefit scheme exceeds a certain level. If your client loses fixed protection 2012, the standard lifetime allowance will apply for all future benefit crystallisation events, unless they have, or apply for, another form of protection. Fixed protection 2012 was available for applications until 5 April 2012.
Fixed protection 2014
Fixed protection 2014 is similar to the 2012 version, except that it gives investors a protected lifetime allowance of £1.5m. It was also not available to investors already holding fixed protection 2012. Fixed protection 2014 was available for applications until 5 April 2014.
Individual protection 2014
Individual protection 2014 gives investors a protected lifetime allowance based on the value of their pension rights on 5 April 2014, up to a maximum of £1.5m. Investors arenít eligible to apply if they already hold primary protection, or if their pension rights were worth less than £1.25m on 5 April 2014.
There is a specific method for valuing an investorís pension rights for individual protection purposes. The total value (called the Ďrelevant amountí) is made up of four amounts:
Amount A: pre A-Day pensions in payment
Amount B: post A-day pensions in payment
Amount C: uncrystallised funds in registered pension schemes
Amount D: uncrystallised funds in relieved non-UK schemes.
The value of uncrystallised funds is the market value of the cash and assets as at 5 April 2014. The value of crystallised funds is determined either by revaluing the amount originally crystallised (post A-day funds) or by reference to the annual amount of the pension at a particular date (pre A-day funds).
Investors who hold individual protection 2014 can continue to contribute and accrue benefits. However, normal lifetime allowance excess charges will apply to funds in excess of the investorís personal lifetime allowance when they take benefits.
Investors can apply for individual protection 2014 until 5 April 2017. Applications can be made on HMRC's website.