Fixed Protection 2016

Printer-friendly versionPrinter-friendly version
You can apply for FP2016 from 6 April 2016 if you expect your pension savings to be more than £1 million (including taking into account past benefits already in payment) when you come to take them on or after 6 April 2016. FP2016 can be used to help reduce or mitigate the lifetime allowance (LTA) charge.
 
However, because FP2016 is lost if your benefits increase by more than the cost of living increase in any one tax year, if you apply for and wish to keep FP2016 you must have opted out of the LGPS with effect from 6 April 2016 (because the cost of living increase in 2016/17 was zero and thus any increase in your benefits on and after 6 April 2016 will result in the loss of FP2016). 
 
You can't have FP2016 if you already have primary, enhanced, fixed protection 2012 or fixed protection 2014.
 
With FP2016 your LTA is fixed at £1.25 million rather than the standard LTA. 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 lifetime allowance which, for those with FP2016, is £312,500 (i.e. 25% of your lifetime allowance of £1.25million), or
  • 25% of your remaining LTA if you have previously taken payment of (crystallised) pension benefits as you will have already used up some of your lifetime allowance. 
 
FP2016 will also be lost if you start a new pension arrangement, other than to accept a transfer of existing pension rights, 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 FP2016 you must electronically notify HMRC within 90 days of the day on which you could first reasonably be expected to have known that an event had occurred causing you to have lost this protection. 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.