What is "Pension Protection"?

What is Pension Protection?

Everybody likes to be protected, right? However, pension protection only applies to a small percentage of people, and hence it would be a fair assumption to say IF you have pension protection, you would already know about it.

First of all, it is not given to anybody, without that person applying for the protection to begin with. You must also qualify a number of requirements, in order to be successful in obtaining it.

What does it do?

Pension protection exists to protect those people who have large pension pots, and would have been unfairly penalised by the recent reductions in the Lifetime Allowance, which have occurred since 2012. In essence, pension protection fixes the lifetime allowance at an amount in the past. If you are unsure what a Lifetime Allowance is, please click here!

Types of Pension Protection

As the lifetime allowance has changed a number of times in the past, there are different “types of protection” which could have been obtained in the past. In line with changes to the lifetime allowance, please see below:

2011/12: £1.8m
2012/13 and 2013/14: £1.5m
2014/15 and 2016/16: £1.25m
2016/17 and 2017/18: £1m
2018/19: £1.03m
2019/20: £1.045m

The only pension protection that can still be applied for in the present day, is “Individual Protection 2016” and “Fixed Protection 2016”. “Individual Protection 2016” protects your lifetime allowance to the lower of i) £1.25 million or ii) your pension value at 5th April 2016. One can continue to contribute into their pension with Individual Protection 2016.

“Fixed Protection 2016” fixes your lifetime allowance at £1.25 million, however you are no longer able to continue to build your pension value with this protection in place. If you do, the protection will be lost. There are older types of pension protection, which were available for individuals who wished to fix an older lifetime allowance amount, if it was applicable to them. For more information, please visit the UK government website using this link.