Protecting your pension

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The interim procedure for claiming the 2016 pension protections has come to an end.

The referendum vote has disrupted many plans and timetables this year. Among them is the passage of the Finance Bill, which in any other year would by now have been given Royal Assent and become a Finance Act. In 2016 it looks as if the transition from Bill to Act may not occur until shortly before the new Chancellor announces his first fiscal measures in the Autumn Statement.

The delay in passing the Bill has had some curious consequences. One relates to the 20% reduction in the pension lifetime allowance to £1 million and the associated transitional protections. The third cut in the lifetime allowance and the new protections took effect from 6 April 2016, but the legislation underlying them is in that slow-moving Finance Bill.

A coin jar marked pension with a padlocked chain around the lidInitially, HM Revenue & Customs (HMRC) announced an interim paper-based procedure for claiming the new protections, primarily for anyone starting to draw benefits before the Finance Act 2016 came into being. HMRC promised to set up an on-line application process by the end of July, at which point the interim procedure would end.

They didn’t quite meet this deadline, but the online procedure is now in place – you can find out more at https://www.gov.uk/guidance/pension-schemes-protect-your-lifetime-allowance. Unlike earlier versions of transitional protection, there is no deadline for applications. However, this does not mean you can ignore the provisions until you start to draw your benefits, because they revolve around values as at 6 April 2016 and subsequent actions.

If you think your pension benefits are likely to be higher than £1 million, please contact us as soon as possible to discuss your options. Even if you have already started to draw benefits there are still significant potential tax savings to be had.

The purpose of this blog is to provide technical and generic guidance and should not be interpreted as a personal recommendation or advice. The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.

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