Nilesh Shah, associate at Barnett Waddingham, warned there were five ways in which individuals could lose their protection without even realising.
The lifetime allowance – the limit on the amount of money that can be saved in a pension without triggering a tax charge - currently stands at £1,055,000.
There are three fixed protections in place – one from 2012 at £1.8m; 2014 at £1.5m; and 2016 at £1.25m.
These protections allow savers to protect benefits already expected to be above the lifetime allowance from additional charges.
Mr Shah said conditions could be breached through auto-enrolment, pension transfers, guaranteed minimum pension (GMP) equalisation, divorce or human error.
He warned those with enhanced or fixed lifetime allowance protections must make sure they are not re-enrolled into their employer's pension scheme if they originally opted out.
This is because companies must automatically re-enrol staff into the scheme every three years, even if they’ve previously opted out.
However, employers can choose to not re-enrol someone if they have reasonable grounds to believe they have a relevant lifetime allowance protection.
There are also conditions under which transferring pension savings will not result in the loss of transitional lifetime allowance protections.
For instance, transfers can only be made from a defined contribution scheme to another registered DC scheme, or from a defined benefit scheme to a registered DC scheme, otherwise fixed protection (2012, 2014 or 2016 edition) will be lost.
Regarding guaranteed minimum pensions, if schemes opt to convert benefits that could increase pension contributions leading to breaches.
FTAdviser reported in February that about 100,000 savers could face a six-figure tax bill if their scheme opts to convert their contracted-out benefits.
According to a freedom of information request from Royal London this is the number of people who have secured fixed protection against past cuts in the lifetime allowance for tax relief purposes.
This allows the member to protect the allowance from further reductions, but the saver can no longer contribute to their pension. If their pension changes due to GMP equalisation this could breach the protection.
HMRC officials said these issues were complex and it was possible the government might not be able to resolve them with existing legislation.
But HMRC said it was committed to finding a "pragmatic and proportionate outcome to all of the pension tax issues".
Mr Shah also warned that divorce proceedings could affect pension taxation.
He said: "Receiving pension credits into a DB scheme could result in loss of protection. As could setting up a scheme solely to receive a pension credit.
"If benefits are to be shared in divorce proceedings, then some protections could be lost if you try to counteract the effect of a pension debit by increasing your pension savings.
"In fact, an individual’s lifetime allowance could be reduced by the value of the pension debit and so in some circumstances the impact could be magnified many times over."
Sometimes, people forget about the restrictions in place or an unexpected error can arise which breaches the conditions, said Mr Shah, highlighting the recent Gary Hymanson case.
The case centered on Mr Hymanson’s claim that he had accidentally failed to cancel a standing order to his pension schemes which led to him breaching his lifetime allowance.
In 2012 Mr Hymanson took out a £1.8m lifetime allowance fixed protection but he then failed to cancel a standing order that automatically paid money into his retirement funds.
The First Tier Tribunal found in Mr Hymanson’s favour, ruling the accidental nature of the rule breach meant he should retain a lifetime allowance of £1.8m.
HM Revenue & Customs has since confirmed it will not appeal the ruling.
Mr Shah said: "We all make mistakes, but few would be as costly as accidentally forgetting not to breach the conditions attached to a protected lifetime allowance.
"Proper planning will help, and although sometimes accidents can be overturned – it isn’t advisable to rely that this will apply in your case.
"Prevention is better than cure. Individuals would be better to avoid being in Mr Hymanson’s situation in the first place by ensuring that advisers and employers are aware of the protections in place."
amy.austin@ft.com
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