Act now to protect your pension pot, DSH warns

Pension holders may need to act swiftly to protect their savings before new Government legislation comes into force, DSH Chartered Accountants & Business Advisors has warned.

From April 6, changes in the law mean the lifetime allowance for pension savings reduces from £1.5 million to £1.25 million.

Tax charges are paid on any excess over the lifetime allowance limit. The rate charged depends on how this excess is paid out and is in addition to any income tax paid on pension benefits.

Glen Thomas new“People who already have £1.5 million in their pension pot can put Fixed Protection in place to reduce or mitigate the lifetime allowance charge that would otherwise be payable when taking out a lump sum or pension,” said Glen Thomas, Partner at DSH.

“Fixed Protection means you would retain your lifetime limit of £1.5 million, but would lose it if you make any further pension contributions to a money purchase scheme.”

Glen added that claims for Fixed Protection would need to be made by April 5 and without making one, lifetime limits will forever be fixed at £1.25 million.

As well as Fixed Protection, the Government has also consulted on Individual Protection.

Glen said: “Full details are yet to be published, however it is expected that Individual Protection will allow protection from the lifetime allowance charge for funds valued between £1.25 million and £1.5 million as at April 5.

“It is understood that Individual Protection will still allow pension contributions to be made in some circumstances, providing you with greater flexibility, so people who have funds over £1.25 million as at April 5 should consider claiming both.”

Individual Protection claims will be able to be made after April 6 and once the 2014 Finance Bill attains Royal Assent.

Glen added that while those contributing to a personal pension plan are likely to have a good idea of the level of their savings, it is not so easy to determine savings from a defined benefits scheme, sometimes called a final salary pension.

“In most of these cases, the annual benefit you will be entitled to on retirement needs to be multiplied by 20 to give you an idea of whether you have exceeded the new lower lifetime limit of £1.25 million,” Glen said.

“If you have, you will be able to apply for Fixed Protection, although you will need to consider how the benefits will accrue in the future. This is a complex area, and you should take advice on this before acting.”

To find out more about DSH Chartered Accountants & Business Advisors, visit or call 01622 690666.

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