HMRC has provided clarification on the pension lifetime allowance after individuals expressed confusion over the effective date of protection, with the tax authority also adding the 2012 to 2013 tax year to the annual allowance calculator, coming into effect by mid-November
HMRC has clarified that for individual protection 2016 (IP2016) and fixed protection 2016 (FP2016) and the date a member’s protection is effective from is:
- 6 April 2016
- the date the IP2016 or FP2016 became active (if previously dormant) following the loss of an earlier form of lifetime allowance protection
For individual protection 2014 (IP2014) the date a member’s protection is effective from is:
- 6 April 2014
- the date the IP2014 became active (if previously dormant) following the loss of an earlier form of lifetime allowance protection
In April 2016 the lifetime allowance, the amount of tax-privileged savings that individuals can build up in their lifetime, was cut from £1.25m to £1m. Since 2012 the lifetime allowance has been cut by £800,000.
Alongside the reductions come protections are introduced for those close to or over the new allowance.
After launching a beta version of its annual allowance calculator, HMRC will be adding the 2012 to 2013 tax year into the calculator as a priority with the aim to do so by mid-November.
The beta annual allowance calculator helps pension scheme members work out how much annual allowance they have used and how much they can contribute to their pension schemes without facing an annual allowance charge.
More information is available here.
