Personal Pension  

Apply for fixed protection now: Aviva

John Lawson, head of policy for pensions and investment at Aviva, said advisers with defined contribution pension clients should act now to protect their retirement savings pots.

With the impending reduction in the standard lifetime allowance on 6 April 2014, HM Revenue & Customs has introduced two protections.

Fixed protection 2014 will work in the same way as fixed protection 2012 except that the individual’s lifetime allowance will be fixed at £1.5m. No benefit accrual is permitted after 5 April 2014 and applications must be with HMRC by that date.

Article continues after advert

Individual protection will allow contributions to be made after 5 April 2014 without the loss of protection. It will be available where pension benefits are valued at £1.25m or more on 5 April 2014 and provides an individual LTA of the value at that date capped at £1.5m.

Individual protection will shelter the fund value as at 5 April 2014 but the final rules for how this type of protection will work have yet to be published.

In a video interview with FTAdviser, Mr Lawson said: “Fixed protection, to me, is more of a money purchase vehicle than individual protection. Individual protection is more for people who want to stay in schemes.

“People in money purchase schemes will stop contributing so fixed protection is most appropriate for them. At this stage, individual protection is most likely to apply to those making continued contributions.

“People in defined benefit schemes whose employer does not offer a cash alternative for coming out of the scheme, so typically public servants.

“There is no harm in applying for fixed protection now and applying for individual protection once the rules for this come out.”

Click here to watch the interview with Mr Lawson.