Understanding your lifetime allowance

Fixed protection sets the lifetime allowance at a specific level to provide protection against the lifetime allowance charge for benefits up to that amount.

These levels are:

• £1.8 million for fixed protection 2012.
• £1.5 million for fixed protection 2014.
• £1.25 million for fixed protection 2016.

If the standard lifetime allowance rises above the protected amount in the future, then that higher amount will apply.

If you have fixed protection, you’re not able to make further contributions to a money purchase plan from 6 April in the tax year that your protection applies to, without losing the protection. You can also lose fixed protection in other ways – more detail can be found on the HMRC website.

Applications for fixed protection 2012 and 2014 closed on 5 April 2012 and 2014 respectively.

You can make applications for fixed protection 2016 online. Anyone who wants to use the online service needs to have an HMRC Online Services Account.

HMRC will give you a protection reference number which you'll need to provide to your pension scheme each time you take your benefits if you have fixed protection 2016.

Individual protection sets the lifetime allowance at the level of your pension savings:

• as at 5 April 2014 for individual protection 2014, up to a limit of £1.5 million.
• as at 5 April 2016 for individual protection 2016, up to a limit of £1.25 million.

It provides protection against the lifetime allowance charge for benefits up to these levels. If the standard lifetime allowance rises above the individual protection level in the future, the higher amount will apply.

If you have individual protection you can make additional pension contributions if you want to, and keep the protection, but you’d have to pay tax on anything over your personal lifetime allowance when you come to take benefits.

You can apply for individual protection online – though you need to have an HMRC Online Services Account.

HMRC will give you a protection reference number which you'll need to provide to your pension scheme each time you take your benefits if you have individual protection 2016.

If you’d built up pension savings of more than £1.5 million as at 5 April 2006, you could apply for primary protection – which would give you an enhancement to the standard lifetime allowance.

Since 6 April 2012 the allowance for primary protection has been calculated as:

• £1.8 million + (£1.8 million x the enhancement factor shown on your protection certificate).

If the standard lifetime allowance rises above £1.8 million, then that higher amount will apply.

If you have primary protection, you can make further pension contributions if you want to and keep the protection, but you’ll have to pay tax on anything over your personal lifetime allowance when you come to take your benefits.

Applications for primary protection closed on 5 April 2009.

This provides full protection from the lifetime allowance charge for the value of the whole of your pension benefits as at 5 April 2006, regardless of subsequent growth, as long as the protection is still held when you come to take benefits.

If you have enhanced protection, it will remain in place unless you lose it because you break one of the conditions for keeping enhanced protection (which include making further contributions to a money purchase plan at any time on or after 6 April 2006), or inform HMRC that you no longer want it. You can find more information on the HMRC website.