HMRC may scrap LTA protection deadlines
The deadlines for applying for protection from lifetime allowance reductions could be removed under options being considered by Revenue & Customs.
In a five-page publication, Pension Schemes Newsletter 70 – July 2015, HMRC confirmed proposals in the summer Budget for the lifetime allowance to be cut from £1.25m to £1m from 6 April 2016.
Transitional protection will be introduced alongside the reduction to make sure the change is not retrospective.
There will be two protection regimes: for fixed protection, the applicant must have no benefit accrual on or after 6 April 2016, and for individual protection, the applicant must have savings of at least £1m on 5 April 2016.
| Current lifetime allowance | Lifetime allowance from 6 April 2016 |
| £1.25m | £1m |
However, the notification process will be different, because individuals will not need to notify HMRC in advance if they want to rely on fixed protection or have three years to apply for individual protection.
The publication added: “HMRC is considering options around removing the deadlines for applying for these protections. We will be discussing this informally with stakeholders over the next few weeks so that we can publish full details later this summer.”
Pension specialists gave varied assessments of how a change could affect advisers and their clients.
Claire Trott, head of pensions technical for Nottinghamshire-based Talbot and Muir, said: “The removal or extension of the application deadline for individual protection could be an issue, because in order to rely on it, a valuation or benefit calculation is needed as at 5 April 2016, and this could be increasingly hard to get the longer it is left.
Martin Tilley, director of technical services for Surrey-based Dentons Pension Management, said: “The actual process for application for protection is expected to be published later this summer, which should give time for protection options to be considered with those clients that might be affected prior to April 2016.”
Background
The lifetime allowance was introduced in 2006 at £1.5m, increasing each year until it reached £1.8m in 2010. Since then there have been two reductions.
However, those with benefits valued in excess of the allowance have been able to apply for protection to protect the value of benefits they have built up and future benefits that may accrue, from tax charges.
