HM Revenue & Customs (HMRC) has launched an online form to help savers protect the most substantial pension pots.
The form, launched on 12 August, provides a quick and easy option for certain people to apply for fixed protection 2014 for their lifetime allowance.
From 6 April 2014, the lifetime allowance – the amount someone can put into their pension arrangements and receive tax relief on the savings – will be reduced to £1.25 million from £1.5 million.
Unless the pension saver puts in place some form of lifetime allowance protection, if their pension savings are worth more than £1.25 million when they take their benefits, they will have to pay the lifetime allowance tax charge on the excess, at a rate of 55 per cent on a lump sum and 25 per cent if taken as a pension.
Fixed protection 2014 has been introduced to protect people with pension pots worth more than £1.25m but no more than £1.5 million. Applications must be made before 6 April 2014 and there are certain eligibility rules.
HMRC said: “If you’re unsure of the value of your pensions savings and don’t know whether you need fixed protection 2014 you’ll need to contact your scheme administrator or financial adviser. You can also use the lifetime allowance checking tool to help you decide whether to apply for fixed protection 2014 and also individual protection 2014.”
Details of individual protection 2014, for which the application process will open on 6 April 2014, will be confirmed later but it is expected that it will give a lifetime allowance equal to the value of pension rights on 5 April 2014 – up to an overall maximum of £1.5 million – and will not be affected by further savings into a pension scheme. Pension savings in excess of the lifetime allowance will be subject to the lifetime allowance charge
The online form is available at www.hmrc.gov.uk/pensionschemes/fp14online.htm where a paper version can also be downloaded.