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Pension tax relief

Individual Protection 2014 (IP2014)

The Lifetime Allowance  is the maximum amount of pension savings that you can build up over your lifetime that benefit from UK tax relief.  The level of the standard The Lifetime Allowance reduced from £1.5million to £1.25million on 6 April 2014.

You can choose to protect any pension savings built up before 6 April 2014 from the Lifetime Allowance charge (subject to an overall maximum of £1.5million), by applying for Individual Protection (IP2014). There is an online tool to help you decide whether you should apply for IP2014 which can be found at http://www.hmrc.gov.uk/tools/lifetimeallowance/index.htm

If you have pension savings of over £1.25million on 5 April 2014 you can apply for IP2014 as long as you don’t have primary protection, see http://www.hmrc.gov.uk/manuals/rpsmmanual/RPSM03100000.htm

IP2014 will give you a protected the Lifetime Allowance equal to the value of your pension savings on 5 April 2014 subject to an overall maximum of £1.5million.  Those applying for IP2014 can continue to make future pension savings but any pension savings above the protected the Lifetime Allowance will be liable to a the Lifetime Allowance charge when benefits crystallise.

You can apply for IP2014 if you hold open Enhanced Protection, Fixed Protection or Fixed Protection 2014, but the IP2014 will lie dormant until such time as Enhanced Protection, Fixed Protection or Fixed Protection 2014 is lost – at which time IP2014 will move to open.

IP2014 is available even if your pension savings on 5 April 2014 have a value of more than £1.5million. Any pension savings in excess of this will not be protected and subject to the LTA charge when benefits crystallise. See http://www.hmrc.gov.uk/manuals/rpsmmanual/rpsm11105000.htm for more guidance on the lifetime allowance charge.

If at some time in the future the level of the standard LTA is higher than the level of the personalised the Lifetime Allowance, the IP2014 protection will cease to apply and the individual will revert to the higher standard the Lifetime Allowance.

There will be a three year period in which you will be able to apply for IP2014 (6 April 2014 to 5 April 2017). Although IP2014 will operate from 6 April 2014, the protection will not be available until after the Finance Bill has received Royal Assent. The application for IP2014 will be available online from 18 August 2014. You will have up to 5 April 2017 to submit your IP2014 application to HMRC.