Scheme members who already had substantial retirement benefits at A-Day were able to take advantage of two forms of protection under the provisions of the Finance Act 2004:
- enhanced protection offers protection for all benefits against the lifetime allowance charge. The protection is available to any individual with benefits accrued at A-Day and allows the value of pre A-Day benefits to be linked to indexation or movements in future earnings or investment growth, although no further benefits may be accrued under defined benefit (final salary) schemes or further contributions made to defined contribution (money purchase) schemes; and
- primary protection allows a member with benefits in excess of £1.5 million at A-Day to elect to have a personal lifetime allowance which is equal to the deemed value of his benefits at that time. The deemed value then replaces, and grows in line with, the standard lifetime allowance.
Notification of the member’s intention to rely on either of these forms of protection must be submitted to the tax authorities by 5 April 2009.
Comment: trustees and scheme administrators may wish to remind members to whom these protections may apply of the approaching notification deadline.