Techzone

£1.25M

LTA tax no longer applies from the 2023/24 tax year. However, the protection remains relevant for the calculation of tax free cash rights and the taxation of certain lump sum payments.

Before 6 April 2023
No 'relevant benefit accrual' was allowed from 6 April 2016 to 5 April 2023, i.e.

• Money purchase schemes - broadly speaking, no contributions. The exceptions to this general rule were contributions for life cover that was in place before 6 April 2006.
• Defined benefit schemes - the benefit value couldn't increase by more than:

1. 1. any annual percentage rate of benefit increase specified in the scheme's rules on 9 December 2015, or
   2. if no increases specified, the higher of the increase in CPI (if any) or relevant statutory increases.

From 6 April 2023
As long as FP2016 was registered by 15 March 2023 and the protection remained valid, relevant benefit accrual can recommence on or after 6 April 2023.

If FP2016 was registered after 15 March 2023, the protection will be lost if there is any relevant benefit accrual.  

Yes, before 6 April 2023 it was lost if:

• relevant benefit accrual took place (see above), or
• the individual received an impermissible transfer or made a transfer that was not a permitted transfer, or
• a new pension arrangement was started for the individual - although there were a few exceptions (e.g. to accept a permitted transfer).

From 6 April 2023, FP2016 cannot be lost provided it was registered by 15 March 2023 and had not been invalidated or revoked before 6 April 2023.

However, those who registered FP2016 after 15 March 2023 can still lose protection, as previously.

Only those who had total benefits (crystallised and uncrystallised) valued above £1M on 5 April 2016 and don't have primary protection or individual protection 2014.

Any active enhanced or fixed protection (any version) will take precedence, with IP2016 dormant until the other protection is lost.

The total value of benefits as at 5 April 2016, subject to a maximum of £1.25M.

LTA tax no longer applies from the 2023/24 tax year. However, the protection remains relevant for the calculation of tax free cash rights and the taxation of certain lump sum payments.

£1.5M

LTA tax no longer applies from the 2023/24 tax year. However, the protection remains relevant for the calculation of tax free cash rights and the taxation of certain lump sum payments.

Before 6 April 2023
No 'relevant benefit accrual' was allowed between 6 April 2014 and 5 April 2023, i.e.

• Money purchase schemes - broadly speaking, no contributions. The exceptions to this general rule were contributions for life cover that was in place before 6 April 2006.
• Defined benefit schemes - the benefit value couldn't increase by more than:

1. 1. any annual percentage rate of benefit increase specified in the scheme's rules on 11 December 2012, or
   2. if no increases specified, the higher of the increase in CPI (if any) or relevant statutory increases.

From 6 April 2023
Relevant benefit accrual can recommence without losing FP2014.

Yes, before 6 April 2023 it was lost if:

• relevant benefit accrual took place (see above), or
• the individual received an impermissible transfer or made a transfer that was not a permitted transfer, or
• a new pension arrangement was started for the individual - although there were a few exceptions (e.g. to accept a permitted transfer).

From 6 April 2023, FP2014 cannot be lost.

Only those who had total benefits (crystallised and uncrystallised) valued above £1.25M on 5 April 2014 and don't have primary protection.

Any active enhanced or fixed protection (2012 or 2014) will take precedence, with IP2014 dormant until the other protection is lost.

The total value of benefits as at 5 April 2014, subject to a maximum of £1.5M.

LTA tax no longer applies from the 2023/24 tax year. However, the protection remains relevant for the calculation of tax free cash rights and the taxation of certain lump sum payments.

£1.8M

LTA tax no longer applies from the 2023/24 tax year. However, the protection remains relevant for the calculation of tax free cash rights and the taxation of certain lump sum payments.

Before 6 April 2023
No 'relevant benefit accrual' was allowed between 6 April 2012 and 5 April 2023, i.e.

• Money purchase schemes - broadly speaking, no contributions. The exceptions to this general rule were contributions for life cover that was in place before 6 April 2006 and contracted out rebates.
• Defined benefit schemes - the benefit value couldn't increase by more than:

1. 1. any annual percentage rate of benefit increase specified in the scheme's rules on 9 December 2010, or
   2. if no increases specified, the higher of the increase in CPI (if any) or relevant statutory increases.

From 6 April 2023
Relevant benefit accrual can recommence without losing FP2012.

Yes, before 6 April 2023 it was be lost if:

• relevant benefit accrual took place (see above), or
• the individual received an impermissible transfer or made a transfer that was not a permitted transfer, or
• a new pension arrangement is started for the individual - although there are a few exceptions (e.g. to accept a permitted transfer).

From 6 April 2023, FP2012 cannot be lost.

Unlimited - as long as enhanced protection remains valid there will be no LTA tax charge, regardless of the value of benefits paid.

Although LTA tax no longer applies from the 2023/24 tax year, the protection remains relevant for the calculation of tax free cash rights and the taxation of certain lump sum payments.

Before 6 April 2023
No 'relevant benefit accrual' was allowed between 6 April 2006 and 5 April 2023, i.e.

• Money purchase schemes - broadly speaking, no contributions. The exceptions to this general rule were contributions for life cover that was in place before 6 April 2006 and NI rebates to contracting out plans that were in place before 6 April 2006.
• Defined benefit schemes - contributions could continue after 5 April 2006. But the restriction for these schemes was a limit on the size of benefit that could be paid out. The crystallised value of any benefits taken, or the actual value transferred out, couldn't exceed the appropriate limit. Broadly speaking, the appropriate limit was the value of the benefits built up under the scheme at 5 April 2006, increased by the greater of:

• • 5% a year (or RPI if greater)
  • salary growth (subject to a cap, for post '89 members) up to the date the benefits are taken

From 6 April 2023
Relevant benefit accrual can recommence without affecting the protection.

The exception to this rule is the unlikely situation where an individual has successfully managed (by concession) to register for enhanced protection after 15 March 2023. In these circumstances, the old rules continue to apply - enhanced protection would be lost if there is relevant benefit accrual.

Registered TFC - if total TFC rights exceeded £375,000 at 5 April 2006 (including a notional value for pensions in payment) then TFC rights would be registered as a protected TFC percentage.

Each time the individual draws benefits, the registered percentage of the crystallised value of the benefits being taken can be paid as TFC.

However, from 6 April 2023, this protection will be capped at the tax free cash value on 5 April 2023.

No registered TFC - Generally, 25% of the lower of:

• the crystallised value of the benefits being taken
• £1.5M less the revalued amount of any previously crystallised benefits

But there are exceptions.

From 6 April 2023, enhanced protection normally cannot be lost. The exception to this rule is the unlikely situation where an individual has successfully managed (by concession) to register for enhanced protection after 15 March 2023.

Before 6 April 2023 (and afterwards for the above exception) it was lost if:

• relevant benefit accrual took place (see above) or
• the individual received an impermissible transfer or made a transfer that was not a permitted transfer, or
• a new pension arrangement was started for the individual - although there were a few exceptions (e.g. to accept a permitted transfer).

An enhancement factor boosts the person's LTA.

Although LTA tax no longer applies from the 2023/24 tax year, the protection remains relevant for the calculation of tax free cash rights and the taxation of certain lump sum payments.

The enhancement factor is calculated as:

(value of benefits on 5 April 2006 - £1.5M) / £1.5M

The way the person's LTA is then calculated depends on when benefits are crystallised:

• For BCEs from 6 April 2012, their LTA is £1.8M increased by their enhancement factor.
• For BCEs before 6 April 2012, their LTA was the standard LTA in force at the time, increased by their enhancement factor.

Example - Jim has an enhancement factor of 0.37. If he takes his benefits in 2023/24, he'll have an LTA of £2,466,000 (1.37 x £1.8M).

Registered TFC - if total TFC rights exceeded £375,000 at 5 April 2006 (including a notional value for pensions in payment) then TFC rights would be registered as a protected TFC amount.

The registered amount is increased by the growth in the standard LTA between 6 April 2006 and the date that the benefits are taken. For benefits taken after 5 April 2012, this increase is calculated using an 'underpinned' LTA of £1.8M.

No registered TFC - Generally, 25% of the lower of:

• the crystallised value of the benefits being taken
• £1.5M less the revalued amount of any previously crystallised benefits

But there are exceptions.

Only on divorce. If pension benefits are subject to a pension debit, the LTA enhancement factor has to be recalculated.

Primary protection will be lost if the pension debit reduces the value of the member's pension rights as at 5 April 2006 to a figure that's below £1.5M.