In the March 2015 budget, the Chancellor announced a reduction in the lifetime allowance (the maximum amount of tax-free pension savings an individual can have from all registered pension schemes) for the 2016/17 tax year from the current £1.25 million to £1 million. In the past where there have been reductions in the lifetime allowance, transitional reliefs have been put in place for individuals who may be affected and who may wish to protect their pension savings. These reliefs operate so as either to allow individuals to keep the benefit of a higher previous allowance or to have an allowance personal to them based on their pension savings as at the date of the change (so in this case 5 April 2016).

Fixed Protection 2016 will operate to provide a lifetime allowance of £1.25 million but no future accrual will be permitted after 5 April 2016; individuals wishing to take up this option must therefore consider now what ceasing accrual will mean for their pension provision as a whole – indeed it would be prudent to gather information now to consider pension options going forwards.

Individual Protection 2016 will give individuals with pension savings of more than £1million as at 5 April 2016 a lifetime allowance based on that value up to a maximum of £1.25 million.

Note that it may be possible to apply for both forms of protection, in which event Fixed Protection 16 will take precedence over Individual Protection 16 unless and until Fixed Protection 16 is lost.

Although the Government has confirmed that these protections will operate on the same basis as protections introduced in 2014, unhelpfully, the legislation spelling out the detail is unlikely to be finalised before 5 April 2016 – i.e. when the new lifetime allowance will take effect. The Government has also said that the application process will be different. Those likely to be affected should assess their arrangements and options now, particularly in view of the deadline for ceasing accrual from 5 April 2016, to ensure the ability to claim fixed protection is not lost.