Advisers should stop trying to choose between fixed and individual protection for pension contributions and encourage clients to apply for both, according to Suffolk Life.
Claire Trott, pensions technical manager at the self-invested personal pension (Sipp) provider, said she has been inundated with calls from IFAs looking for clarification on types of lifetime allowance protection.
“A lot of them are trying to choose between the two types,” she said. “People should apply for individual protection even if they have fixed protection.”
HMRC has recently released guidance on fixed protection, with further details on individual protection still being finalised.
Fixed protection allows savers to secure the existing higher limit of £1.5m for lifetime pension contributions, while individual protection sets an amount up to the lifetime limit for an individual based on their circumstances.
Ms Trott said that individuals should apply for individual protection even if they have fixed protection in place as certain events can render fixed protection invalid, such as if a further accrual occurs.
Auto-enrolment presents a particular risk for this, she said. If, for example, an individual with fixed protection in place was auto-enrolled into a scheme, an accrual could take place before the individual opted out. Those with significant pension benefits already accrued working in consultancy or on medium-term contracts are particularly at risk, she added.
“There are a lot of people who haven’t had any previous protection who are already over the limit,” she said. “They are just looking at getting something in place. People need to start looking at it sooner rather than later.”
Clients often have pension pots they have forgotten about, she added, which could add to the risk of breaching the limit.
