NEWSLETTER: Protection – 2014 style!
Contributed by MW Pensions
31 July, 2013
Contributed by MW Pensions. [www.mwpensions.co.uk]
This Newsletter is intended as technical support for financial and other professional advisers. Members of the general public should not rely upon it
Finance Act 2013
This received Royal Assent on 17 July 2013 and includes the legislation to reduce the Lifetime Allowance (LTA) from £1.5 million to £1.25 million from 2014-15 as well as for Fixed Protection 2014 (FP2014), which is intended to protect savers who think they may be affected by the reduction in the LTA.
If someone successfully applies for FP2014 then their LTA will remain at £1.5m but they will not be allowed to make any further contributions, or have any contributions made on their behalf. If they do, they will lose their FP2014.
In addition to the Finance Act there are a number of new sets of regulations that are relevant to pension scheme. These are:
SI 2013/1740 - The Registered Pension Schemes and Relieved Non-UK Pension Schemes (Lifetime Allowance Transitional Protection) (Amendment) Regulations 2013 – which make a number of amendments to the existing fixed protection legislation
SI 2013/1741 - The Registered Pension Schemes and Relieved Non-UK Pension Schemes (Lifetime Allowance Transitional Protection) (Notification) Regulations 2013 – which set out how to apply for FP2014 – basically there will be a form!
SI 2013/1742 - The Registered Pension Schemes (Provision of Information) (Amendment) Regulations 2013 – which set out the information requirements associated with FP2014 as well as new information requirements in connection with the annual allowance and QROPS
SI 2013/1818 The Registered Pension Schemes (Authorised Payments) (Amendment) Regulations 2013 – which amend the existing authorised payment regulations as a consequence of the abolition of contracting out for defined contribution pension schemes from 6th April 2012.
All these regulations will come into force from 12 August 2013
Fixed Protection 2014
When the FP2014 notification regulations come into force on 12th August it will mean that individuals will be able to apply for FP2014 from that date.
The form to apply for FP2014 should therefore be on the HMRC website from 12th August. The form can be completed and submitted online or by printing the PDF off and posting the completed form to HMRC Pension Schemes Services.
Applications for FP2014 must be received by HMRC by 5 April 2014. HMRC have advised that they will not send out any FP2014 certificates before 1 November 2013.
Individual Protection 2014
As you may be awar,e HMRC and The Treasury are currently consulting on Individual Protection 2014 (IP2014). The proposal is that someone with more than £1.25M total pension assets as at 5th April 2014 will be able to apply for IP2014 and then will have their own personal LTA. Thiswill be set at whatever the value of their total pension assets was as at 5th April 2014. However, unlike FP2014, they will be allowed to make (have have made on their behalf) contributions post 5th April 2014. This may be useful if, for example, some of their investments fall in value.
Anyone who currently has either Primary or Enhanced Protection will not be eligible for IP2014.
However, it will be possible for those who apply for FP2014 to also apply for IP2014.
For those with IP2014, their personalised LTA will never be increased unless the standard LTA increases from £1.25 million to a level greater than the individual’s personalised LTA. In these circumstances the individual’s personalised LTA would revert to the standard LTA.
The consultation document on IP2014 can be found at
The consultation closes on 2nd September 2013.
Although it is proposed that individuals will be able to apply for both FP2014 and IP2014, because of the way the different projection regimes will work, HMRC have advised that it will not be possible to send in applications for both at the same time.
Applications for FP2014 must be received by HMRC by 5 April 2014, whereas applications for IP2014 cannot be submitted until after this date as a valuation of pension savings on this day will be required.
It is proposed that there will be a three year window to apply for IP2014.
What should advisors do?
They need to look at their client base and identify which of their clients should consider applying for either or both of FP2014 and IP2014. Remember though that:
- These new Protections, like Primary and Enhanced Protection, apply to someone’s total UK pension assets. So advisors will need to make sure that they are fully aware of all of their client’s pension assets
- It is the individual who will have to apply for the relevant Protection(s).
- If no action is taken, the default is that the new LTA of £1.25M will apply from 6th April 2014.
Gilt Yield for Drawdown
The gilt yields to be used for drawdown calculations are:
We do not give financial advice and no comments here are intended as such. The above information is based on our understanding of the legislation governing pensions at the time of writing. Before taking any action you should consult a qualified financial and/or tax adviser. Levels, bases of and reliefs from taxation may be subject to change.
This Newsletter is intended for professional advisors only, not members of the general public
Authorised and Regulated by the Financial Services Authority
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