The standard lifetime allowance is to reduce from £1.25 million to £1 million from 6 April 2016.
Transitional protection will be available to anybody who may be affected by this reduction on a similar basis to the protection available when the standard lifetime allowance reduced in April 2014.
HMRC recognise that there may be some individuals who plan on taking benefits between 6 April 2016 and July 2016 who would be looking to rely on either IP2016 or FP2016 but haven’t been able to apply for them.
To help them HMRC will allow temporary applications for IP2016 or FP2016 so that those affected can rely on having transitional protection when they take pension benefits. They will then need to make a full online application once this becomes available.
Individuals looking to make temporary applications will need to write to HMRC giving the following details.
If they are applying for IP2016 they will need to give HMRC
- the total value of their pension funds at 5 April 2016
- a breakdown of the value of their pension funds at 5 April 2016 made up of
- the value of their pre A Day pensions in payment
- the value of their pension benefits that have been crystallised since A Day
- the value of any uncrystallised pension funds they have
- the value of any non UK rights
They will also have to make a declaration that they do not hold either primary protection or individual protection 2014.
If they are applying for FP2016 they will need to make a declaration to HMRC that they do not hold
- primary protection
- enhanced protection
- fixed protection
- fixed protection 2014
HMRC will check their records to make sure that the declarations are correct and after confirming this send the applicants a temporary reference number which can be given to schemes when taking pension benefits.
The temporary reference number will be valid until 31 July 2016.
Individuals who take benefits and rely on their temporary reference number must subsequently make a full online application to make sure they avoid any excessive lifetime allowance tax charge.
If they do not make a full online application, their temporary application for IP2016 or FP2016 will be invalid and they will be liable to a lifetime allowance tax charge on their excess pension benefits above the lifetime allowance.
Talk to a Deep Blue Adviser for more information.