What is Pension fixed protection?

On 6 April 2012 the lifetime allowance for pension savings will reduce to £1.5 million from the current level of £1.8 million. As pension scheme members may have already built up savings of more than £1.5 million or have planned to do so in the expectation that the lifetime allowance would not reduce from the current level, there will be a new form of protection called ‘fixed protection’.
If you as a member expect that your total pension savings will be more than £1.5 million when you come to take your benefits on or after 6 April 2012 you can apply for fixed protection to help reduce your lifetime allowance charge. HM Revenue & Customs (HMRC) must receive your application before 6 April 2012. Fixed protection allows you to take benefits worth up to £1.8 million without paying the lifetime allowance charge, although your ability to accrue benefits in the future is limited.

Does it affect your Pension

Most people will not be affected because their benefits will be less than the lifetime allowance. To receive benefits of more than the lifetime allowance you would need to have saved more than £1.5 million in money purchase pension schemes. If you are a member of a final salary scheme you would need to be entitled to a pension of either of the following:
£75,000 a year
£65,000 a year – if your scheme gives you a separate lump sum (typically three times your annual pension)
If your benefits are more than the lifetime allowance then a tax charge will apply. This is called the lifetime allowance charge.
If you think your pension savings may exceed £1.5 million after 5 April 2012 then you should consider whether fixed protection could help reduce your lifetime allowance charge.

Pensions : Should I apply?

You will need to consider your own particular circumstances before deciding whether to apply. You may wish to seek independent professional advice before making any decision. HMRC cannot give you advice on this.

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