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Fixed protection

Published  06 April 2023
   8 min read

Fixed protection maintains the lifetime allowance at a certain level depending on which fixed protection the individual has. There are now three different versions.

Key facts

  • Fixed protection 2012 maintains the lifetime allowance of £1.8 million.
  • Fixed protection 2014 maintains the lifetime allowance of £1.5 million.
  • Fixed protection 2016 maintains the lifetime allowance of £1.25 million.
  • Unlike individual protection there is no minimum benefit value needed to apply for fixed protection.

What is fixed protection?

Fixed protection maintains the lifetime allowance at a certain level depending on what type the individual has.

There are three different versions: 

Type Maintains the lifetime allowance at You had to apply by
Fixed protection 2012 £1.8 million 5 April 2012
Fixed protection 2014 £1.5 million 5 April 2014
Fixed protection 2016 £1.25 million No end date

Can anyone apply?

The only restrictions on who can apply for fixed protection 2016 relate to other lifetime allowance protections. You can’t have:

  • Primary protection
  • Enhanced protection
  • Any earlier version of fixed protection, for example you can't apply for fixed protect 2016 if you had either fixed protection 2012 or 2014
  • Unlike individual protection there is no minimum benefit value needed to apply for fixed protection

Can you lose fixed protection?

Yes, before 6 April 2023 to keep fixed protection applied for before 15 March 2023 an individual:

  • couldn't start a new arrangement other than to accept a transfer of existing pension rights
  • couldn't have benefit accrual prior to 6 April 2023
  • was subject to restrictions on where and how they can transfer benefits

If the individual broke one of these conditions fixed protection was lost. The individual must tell HMRC if fixed protection is lost.

If somebody applies for fixed protection after 15 March 2023 fixed protection will be lost if an individual:

  • starts a new arrangement other than to accept a transfer of existing pension rights
  • has benefit accrual from 6 April 2016
  • will be subject to restrictions on where and how they can transfer benefits

It is possible to have both fixed and individual protection.

The individual must tell HMRC if fixed protection is lost.

Will benefit accrual or the payment of a contribution lose fixed protection?

For individuals who applied for fixed protection before 15 March 2023, from 6 April 2023 there are no restriction on paying contribution/benefit accrual.

For individuals who apply for fixed protection from 15 March 2023, if they make a pension contribution or has benefit accrual, they lose their fixed protection on the day that occurs. If the individual has more than one pension arrangement and they lose fix protection that applies to all of the arrangements, not just the one where benefit accrual took place.

Different rules apply depending on the type of scheme. More information can be found in the HMRC's Pension Tax Manual.

Can you lose fixed protection on transfer?

For individuals who applied for fixed protection before 15 March 2023, from 6 April 2023 there are no restriction transfers between registered pension schemes.

For individuals who apply for fixed protection from 15 March 2023, the following table sets out the conditions for transfers that preserve fixed protection.

Type of plan Transfer of conditions
Money purchase (other than cash balance) benefits Can only be transferred to another money purchase arrangement under a registered pension scheme.
Defined benefits and cash balance benefits

Can be transferred to:

  • a money purchase arrangement under a registered pension scheme
  • another defined benefit or cash balance arrangement if the transfer is made because:
    • the pension scheme making the transfer is winding up or
    • the employer has sold all or part of their business and the benefits are being transferred to the new employer's scheme.
    • it is made as part of a retirement benefit activities compliance exercise.

HMRC Pensions Tax Manual - PTM093400: Transfers that allow the individual to keep Fixed Protection or Fixed Protection 2014 and 2016

What other types of protection from the lifetime allowance are there?

Before fixed protection was introduced it had been possible to protect pre 6 April 2006 benefits from the lifetime allowance charge using primary and enhanced protection. It is no longer possible to apply for primary and enhanced protection.

How primary and enhanced protection work is explained in our article primary and enhanced protection.

There is also individual protection, more details on this can be found in our individual protection article.

How do you apply for fixed protection? 

Any individual who wishes to apply for lifetime allowance protection has to do so online. There is no deadline for applying for fixed protection 2016 and individual protection 2016.

The individual will need an HMRC Online Services Account - if they do not already have one, they will have to create an account.

Details of their lifetime allowance protections will be held on their online account.

Individuals will no longer receive paper certificates with their lifetime allowance protection details. 

Guidance to help individuals who wish to apply for lifetime allowance protection has been published by HMRC on GOV.UK. 

What if an individual has a temporary reference number?

Individuals that used the interim paper process (before 31 July 2016) but have not followed this up with an online application will continue to have their savings protected and there will be no tax consequences, provided they have not lost their protection.

However, if the individual has further benefits to crystallise they must apply online to get a permanent reference number. Scheme administrators can use HMRC’s ‘look up service’ to check the level of protection and only permanent reference numbers will be recognised.

This means that until the individual has a permanent reference number the payment of benefits will be a delayed or the lifetime allowance charge will be applied.

Further information

Disclaimer

The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. Also it may not reflect the options available under a specific product which may not be as wide as legislations and regulations allow.

All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.