Fixed Protection 2014
The lifetime allowance (LTA) reduced to £1.25 million in 2014/15 and a new protection called fixed protection 2014 was introduced.
If you expect your pension savings to be more than £1.25 million (including taking into account past benefits already in payment) when you come to take them on or after 6 April 2014 you can use fixed protection 2014 to help reduce or mitigate the LTA charge.
With fixed protection 2014 your LTA is fixed at £1.5 million rather than the new standard LTA of £1.25 million.
The maximum tax free lump sum you can take on retirement is the lesser of:
25% of the capital value of your LGPS benefits, or
25% of the LTA which, for those with fixed protection, is £375,000 (i.e. 25% of your LTA of £1.5 million) or if you have previously taken payment of (crystallised) pension benefits 25% of the remaining LTA.
You will lose fixed protection 2014 if you start a new pension arrangement, other than to accept a transfer of existing pension rights, or if your benefits increase by more than the cost of living increases, or if you pay contributions into a money purchase pension arrangement other than to a life assurance policy providing death benefits that started before 6 April 2006. You will also be subject to restrictions on where and how you can transfer benefits.
If you lose fixed protection 2014 you must notify HM Revenue & Customs (HMRC) within 90 days. Failure to do so could result in a fine of £300 and a penalty of up to £60 per day after the initial fine has been issued until you supply them with the required notification.
To have fixed protection you must have applied to HMRC in their prescribed form on or before 5 April 2014.