The Lifetime Allowance is to be reduced from £1.8m to £1.5m on 6 April 2012. An individual who expects the value of his pension benefits to exceed £1.5m when he retires (and who does not already have primary protection or enhanced protection) should consider applying for fixed protection. Applications must be made to HMRC by 5 April 2012. If HMRC accepts the application for fixed protection, the individual’s protected lifetime allowance will be £1.8m, provided he does not accrue any further pension benefits in a registered pension scheme after 5 April 2012 (including under the new automatic enrolment regime).

Click here for the HMRC guidance.

Benefit accrual would include any contribution to a DC scheme. In a DB scheme, matters triggering benefit accrual for the purposes of fixed protection may include:

  • an increase in the scheme’s earnings cap;
  • a change in the scheme’s pension increase or revaluation rate; and
  • a change in late retirement factors.

The test for benefit accrual for fixed protection will be an ongoing test against any increases in the value of the member’s prospective pension and lump sum rights – so benefit accrual may occur at any time up to the date benefits are taken.