Enhanced Protection Print

Enhanced Protection was available for those individuals, irrespective of the value of their pension rights, who made no further contributions into a registered pension scheme after 5 April 2006. In certain instances members of defined benefit schemes may continue to accrue benefits and retain Enhanced Protection. Specific advice should be sought as this is a very complex area.

Under this alternative approach, post A-Day increases in the value of pension funds, and benefit rights accrued before A-Day will be protected from the recovery charge.

The time limit for claiming both Primary Protection and Enhanced Protection was 5 April 2009. After this date  individuals were no longer able to register.

Examples:

  • Primary protection

Before A-Day, Jane has an unvested fund of £3 million and makes further contributions post A-Day to a registered scheme. She registers her entitlement to 200% of the lifetime allowance.

At vesting her fund value is £4 million and the deemed lifetime allowance  remains at £1.8 million, making her personal lifetime allowance £3.6 million (200% of the deemed lifetime allowance). There is a recovery charge on the £0.4 million that has accrued in excess of her personal lifetime allowance.

  • Enhanced protection

Before A-Day, Brian has an uncrystallised Defined Contribution (DC) fund of £4.2 million and makes no further contributions to any registered scheme.

At vesting his fund value is £5.5 million and the indexed personal lifetime allowance is £5.04 million (£4.2 million increased at the same rate as the statutory lifetime allowance). There is no recovery charge to pay even though the fund has increased above the value of the indexed pre A-Day fund because Brian has satisfied the conditions to retain his enhanced protection. These amounts will remain fixed until such time as the lifetime allowance exceeds £1.8 million.

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