The deadline for applications was 5 April 2014, and applicants received a paper certificate confirming their protection.
The revocation conditions for FP 2014 are the same as for FP 2012. A member cannot hold FP 2014 if they hold FP 2012, enhanced protection or primary protection.
Individual Protection 2014
Also introduced in 2014 was “individual protection 2014” (IP 2014).
If fixed protection was similar to enhanced protection, individual protection was similar to primary protection. (It’s unclear why individual protection was introduced in 2014 and not in 2012.)
Upon successful application, the member gained a protected LTA based on their fund value as at 5 April 2014, albeit capped at £1,500,000.
A member can hold IP 2014 alongside FP 2014, FP 2012 and enhanced protection but not primary protection.
To apply for IP 2014, the member had to have a total fund value across all their pensions of at least £1,250,000 as at 5 April 2016, and there were different methods for attributing a capital value to different types of benefits as we’ll come on to in a moment.
Here’s how pension rights were valued for IP 2014 purposes. (This is the same for IP 2016.)
Pre-2006 benefits in payment
The value is calculated by taking the annual pension amount as at 5 April 2014 and multiplying it by 25. For capped drawdown, you use the GAD maximum income amount.
It gets more complicated if the member has separately taken benefits under another scheme between 6 April 2006 and 5 April 2014.
In that situation, you take the annual rate of income payable from the pre-2006 benefits as at the date the member first took benefits post-2006.
You multiply it by 25, and then revalue it by multiplying it by £1,500,000 and dividing by the standard LTA in place at that time.
(Annual pension x 25) x (£1,500,000 / standard LTA)
Post-2006 benefits in payment
Any pension benefits taken from 6th April 2006 onwards will have been tested against the LTA.
For IP 2014 valuation purposes, you take the monetary amount of the benefits that were crystallised and revalue them in line with the change in standard LTA.
Amounts crystallised x (£1,500,000 / standard LTA at BCE)
Uncrystallised funds
These are more straightforward to calculate. For money purchase pension rights, it is simply the capital value of those rights.
For defined benefits pension rights, you take the annual pension to which the member would be entitled and multiply it by 20. You then add the value of the tax-free lump sum to that figure.
In other words, you use the capital value you would use for LTA purposes if they were being crystallised on 5 April 2014.
Losing the protection
Unlike FP 2014, IP 2014 cannot be revoked by a contribution or by benefit accrual.
However, if the member’s fund is subject to a pension sharing order on divorce, they will need to notify HMRC as their protected LTA will be reduced given that a chunk of funds have left their pension.
