Detailed guide: Pension schemes: protect your lifetime allowance

Updated: This guidance has been updated with information about lifetime allowance protection reference numbers.

The standard lifetime allowance was reduced to:

  • £1.25 million on 6 April 2014
  • £1 million on 6 April 2016

But you may be able to protect your pension(s) from these reductions.

In most cases, if you already have protection you can view it online.

There are 2 protections you can apply for, these are shown below:

Protection What it does Can I keep building
up my pension(s)?
Individual protection 2016 Protects your lifetime allowance to the lower of:

– the value of your pension(s) at 5 April 2016
– £1.25 million

Yes. But you must pay tax on money taken from your pension(s) that exceed your protected lifetime allowance.
Fixed protection 2016 Fixes your lifetime allowance at £1.25 million. No, except in limited circumstances. If you do, you’ll:

– lose your fixed protection 2016
– pay tax on any pension(s) above the standard lifetime allowance when you take your pension

Individual protection 2016

You can apply if your pension(s) was worth more than £1 million at 5 April 2016.

You can still apply if you already have:

  • enhanced protection
  • fixed protection
  • fixed protection 2014
  • fixed protection 2016

Individual protection 2016 will stay dormant until you lose or give up your previous protection – tell HM Revenue and Customs (HMRC) in writing if this happens.

If you applied for protection from the 2016 reduction and received a temporary reference number, you must apply online for a permanent reference number.

You can’t apply if you’ve either:

  • primary protection
  • individual protection 2014

Before you start

You’ll need:

  • an account for HMRC Online Services – you can set one up when you start your application
  • to know what your pension(s) was worth on 5 April 2016 and a breakdown of the amount

If you don’t know this information, you can ask your pension scheme administrator. If you’ve more than one scheme, add the amounts from each scheme together.

Check if there are any current service problems, or times when it won’t be available.

Fixed protection 2016

You can apply if:

  • you or your employer haven’t added to your pension since 5 April 2016
  • you opted out of any workplace schemes by 5 April 2016

You can still apply for fixed protection 2016 if you already have individual protection 2014. Fixed protection 2016 will be dormant until you lose your previous protection. You should tell HMRC in writing when you have lost lifetime allowance protection.

You can’t apply if you have:

  • enhanced protection
  • primary protection
  • fixed protection
  • fixed protection 2014

If you applied for protection from the 2016 reduction and received a temporary reference number, you must apply online for a permanent reference number.

Before you start

You’ll need an account for HMRC Online Services – you can set one up when you start your application.

Check if there are any current service problems, or times when it won’t be available.

Lifetime allowance protection reference numbers

Once you’ve applied for lifetime allowance protection through the online service you’ll receive 2 reference numbers that you’ll need to keep. These are your:

  • protection notification number
  • scheme administrator reference

You’ll need to give these reference numbers to your scheme administrator when you decide to take money from your pension to show that you have a lifetime allowance protection.

Your protection notification number will be shown as:

  • FP16 followed by 10 digits and 1 letter for fixed protection 2016, for example FP161234567890A
  • IP16 followed by 10 digits and 1 letter for individual protection 2016, for example IP161234567890B

Your scheme administrator reference will be shown as PSA followed by 8 digits and 1 letter.

You can find these reference numbers on your personal tax account, even if you didn’t apply for lifetime allowance protection online.

Report a change

Changes in your pension can affect if you can keep your individual protection for 2014 and 2016. You should tell HMRC if:

  • the amount of your pension breakdown changes
  • you need to add or change a pension debit because you receive a discharge notice as a result of a pension sharing order
    • you must tell us within 60 days of the pension debit

If you’ve protected your pension savings online you’ll be able to amend your protections yourself. For example if you made mistakes with the values when you applied or if you have pension debits which affect the amount you’re protected by.

You should make these amendments by logging into your personal tax account and selecting the ‘pensions’ option.

If you didn’t protect your pension savings online, you should tell HMRC in writing about these changes and HMRC will write to you to let you know how it affects your protection.

If you’ve lost protection

If you’ve lost your protection you’ll need to tell HMRC in writing. We’ll need:

  • your full name, address and National Insurance number
  • the exact date that you lost protection
  • the reason why you lost protection
    • for example, benefit accrual, auto enrolment
  • the type of pension arrangement
    • defined contribution or defined benefit
  • your original certificate (if you still have it), these weren’t issued for
    • IP2016
    • FP2016

If you have a paper certificate, you should send this with the information in the bullet list above to us by post.

If you applied for IP2016 or FP2016 and don’t have a certificate, this information can be provided by email.

Source: HMRC

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