The question of whether to apply to HMRC for “Pension Protection” is something that investors might wish to consider. With the Chancellor’s Autumn Statement coming up on Wednesday (23rd November), there was anticipation he might reduce the lifetime allowances further.
The standard lifetime allowance is now £1 million, but for example you can protect the higher figure of £1.25 million by applying to HMRC. If your pension fund goes above the lifetime allowance, then you will pay a hefty tax charge when you draw your pension.
So having decided what type of protection you want (nothing is simple in the world of pensions, so you may need to take some professional advice on this if in doubt), you might think it is necessary to set aside a couple of hours to go through what you anticipate might be a complex process with lots of form filling.
But in reality, it takes only a few minutes. Firstly you have to register to create a Government Gateway Account. This is done on-line and takes less than 5 minutes. Then you simply request Fixed Pension Protection 2016 (don’t do that if you are still contributing funds to your pension). Bingo, it’s done. No complex form filling at all.
So anyone who thinks they may exceed the lifetime allowance in the future would surely be well advised to look at the options available. See here for more information: https://www.gov.uk/guidance/pension-schemes-protect-your-lifetime-allowance and here: https://www.gov.uk/tax-on-your-private-pension/lifetime-allowance
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