It wasn’t until 2014 that individual protection became available. It is akin to primary protection because not only do you need a certain benefit level to apply, it allows those that have already applied to continue to contribute or accrue benefits. It is also not possible to lose individual protection.
Individual protection 2014 offered a personal lifetime allowance between £1.25m and £1.5m equal to the value of benefits on April 5 2014. It is possible to apply for this until April 5 2017 and will overlap with the application dates for fixed protection 2016 and individual protection 2016, if they come into force.
It has been proposed that individual protection 2016 will also give a personal lifetime allowance of between £1m and £1.25m for those with benefits valued in that region on April 5 2016.
It is possible to apply for individual protection if you have fixed protection of any kind or enhanced, but not if you have primary. The differing levels of lifetime allowances can cause confusion for many, especially if they are lost part way through taking a series of benefit crystallisations.
It is good that it is not necessary to go back and recalculate the amount used in each benefit crystallisation event if the protection is lost after the event itself, because it means the member should always be aware that there won’t be a retrospective tax charge.
Claire Trott is head of pensions technical at Talbot and Muir
Consultation: Pensions tax relief
In the summer Budget, George Osborne announced a green paper on pension savings that would seek views from the industry on the tax system for pensions. Closing on September 30 2015, the consultation paper states:
“It has been more than a decade since the government last reviewed the support on offer through the tax system for those saving into a pension. At the heart of the current system is a simple principle: the contributions you make to a pension during your working life are tax free, and you pay tax on them when you come to take your pension.
However, recent years have seen a substantial increase in life expectancy. With increased longevity and the changing nature of pension provision, the government needs to make sure that the system incentivises more people to take responsibility for their pension savings so that they are able to meet their aspirations in retirement.
If people are to take responsibility for their retirement, it is important that the support on offer from the government is simple and transparent, and that complexity does not undermine the incentive for individuals to save.
It is also vital that the system is sustainable. During the course of the last parliament, the government took action to control the growing cost of pensions tax relief through the lifetime and annual allowances. The state pension age was also raised to reflect the pressure placed on the public finances by increased life expectancy. These difficult but important decisions have helped put the public finances on a more sustainable footing.”
