As announced in the Chancellor’s March Budget 2015 and confirmed at Summer Budget 2015, legislation will be introduced in Finance Bill 2016 to reduce the standard Lifetime Allowance to £1 million for the 2016-2017 tax year onwards. It will then increase annually in line with the Consumer Prices Index from the 2018-2019 tax year onwards.
Many medical professionals, particularly those who are members of the NHS Pension Scheme, could find that the total value of their pension benefits exceeds the reduced Lifetime Allowance in future.
For those who will be affected, HM Revenue & Customs is introducing Fixed Protection 2016 and Individual Protection 2016 to provide individuals with pension savings of up to £1.25 million protection from retrospective taxation, subject to certain conditions.
Fixed Protection 2016 fixes the Lifetime Allowance at £1.25 million but no further pension contributions can be made. If the Lifetime Allowance rises to above £1.25 million in future the higher amount will apply.
Individual Protection 2016 gives a personal Lifetime Allowance of the value of the pension benefits as at 5 April 2016, up to a maximum of £1.25 million. Only those with pension benefits of £1 million or more as at 5 April 2016 are therefore eligible to apply. Individual Protection is not lost if further contributions are later made.
If you want to rely on Fixed Protection or Individual Protection you must apply to HMRC and receive a reference number before you take your pension benefits.
For further information or to discuss your retirement planning please contact us on firstname.lastname@example.org or call 0117 966 5699.