HM Revenue and Customs has revealed it is still unsure exactly how transitional protection will be on offer for those hit by the reduction in the lifetime allowance.
Back in March chancellor George Osborne announced that the maximum amount savers can put into their pension pots over their lifetime - known as the lifetime allowance - will be cut from £1.25m to £1m next April.
Any savings above the limit will lose valuable tax relief and suffer a 55 per cent tax rate when it is eventually withdrawn.
In various pension schemes newsletters issued by HMRC since Mr Osborne’s latest pension tax relief cut the tax office stated it “would aim to provide further information about the transitional protection on offer”.
For fixed protection 2016, the applicant must have no benefit accrual on or after 6 April 2016, and for individual protection 2016, the applicant must have savings of at least £1m on 5 April 2016.
However yesterday (29 September) HMRC in its latest pensions newsletter stated: “Unfortunately we are not able to provide as much detail as we would have liked.”
This is because legislation for both the reduction in the lifetime allowance and the protection regimes 2016 will not be delivered until the Finance Bill 2016, which should be published by the end of the year.
As a result, HMRC stated it will not be possible for scheme members to apply for protection until after April 2016.
Individuals who want to rely on fixed protection 2016 need to start thinking about what arrangements they need to make to stop accruing benefits after 5 April 2016, HMRC stated.
HMRC was able to confirm the application process for the protection regimes 2016 will be online and will require the member (or their authorised representative) to provide similar information and declarations as for FP 2014 and IP 2014.
HMRC stated their tax officers hope to be able to provide much more detail on this process both for members and scheme administrators in October 2015.
Back in August, FTAdviser sister publication Financial Adviser reported HMRC was considering removing the deadlines for applying for protection from lifetime allowance reductions.
Individuals would 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.