Primary and enhanced protection

What is primary protection?

Before 6 April 2024, primary protection gave individuals, who had a benefits value on 5 April 2006 which exceeded the lifetime allowance of £1.5 million, their own personal lifetime allowance. This was expressed as a primary protection factor, which was used to calculate the individual's personal lifetime allowance when benefits were taken.

Due to the reduction in the lifetime allowance, from 6 April 2012, the lifetime allowance used to calculate the level of personal lifetime allowance remained at £1.8 million.

Example

Since 6 April 2024, when the lifetime allowance was abolished, primary protection maintains a higher lump sum allowance and lump sum and death benefit allowance.

These allowances are fixed monetary amounts, which are used up when tax-free lump sums are paid in respect of the individual. It is important to note that the figures below are the maximum amounts that can be paid, and any tax-free lump sum benefits taken before 6 April 2024 will reduce the amounts available to be paid tax free.

Can you lose primary protection?

No. Primary protection cannot be revoked, allowing for contributions or benefit accrual after 6 April 2006. But an individual could not apply for fixed or individual protection if they hold primary protection.

Can you still apply for primary protection?

No. Primary protection applications had to be made by 5 April 2009.

What is enhanced protection?

Enhanced protection gave individuals full protection from the lifetime allowance charge when they took their benefits.

An individual with an entitlement to tax-free cash of more than 25% of the lifetime allowance (£375,000) and more than 25% of the fund on 5 April 2006 could also protect their tax-free cash entitlement.

Since 6 April 2024, when the lifetime allowance was abolished, enhanced protection maintains a higher lump sum allowance and lump sum and death benefit allowance. These allowances are fixed monetary amounts, which are used up when tax-free lump sums are paid in respect of the individual. It is important to note that the figures below are the maximum amounts that can be paid, and any tax-free lump sum benefits taken before 6 April 2024 will reduce the amounts available to be paid tax free.

Tax-free cash entitlement

If the individual has a protected the tax-free cash entitlement, this will be shown as a percentage on their certificate. You should note that the percentage can be less than 25%.

If they took their benefits before 6 April 2023 their tax-free cash was based on the same percentage of their benefits value at crystallisation as it was on 5 April 2006.

From 6 April 2023 their tax-free cash is based on the same percentage of their benefits value at crystallisation as it was on 5 April 2006, but this is applied to the value of their uncrystallised rights on 5 April 2023.

If any of the arrangements do not allow more than 25% tax-free cash to be paid, and their entitlement is over 25%, they cannot use the unused allowance under any other arrangement.

HMRC Pensions Tax Manual - PTM176320: Lump sum allowance and lump sum and death benefit allowance: Enhanced protection: Lump sum protection in excess of £375,000

Can you lose enhanced protection?

Before 6 April 2023, if there was any accrual of defined benefits or cash balance rights above a specified level of indexation, and if any contributions were paid to other money purchase arrangements after 6 April 2006, enhanced protection was lost.

Since 6 April 2023, the restriction on paying contributions/benefit accrual has been removed and will not trigger the loss of enhanced protection, where the certificate was issued before 15 March 2023. 

Can you still apply for enhanced protection?

No. Enhanced protection applications had to be made by 5 April 2009.

Transferring to a new provider with enhanced protection

Permitted maximums for a lump sum or lump sum death benefits operate on a per arrangement basis. This means that when uncrystallised benefits are transferred the permitted maximum from the transferring arrangement is brought over and added to the permitted maximum under the receiving arrangement.

Enhanced protection and primary protection — protected lump sum rights of more than £375,000

Individuals with enhanced protection can receive a lump equal to the percentage shown on their enhanced protection certificate, applied to the value of their uncrystallised rights in an arrangement on 5 April 2023.

Individuals with primary protection can receive a lump equal to the monetary amount shown on their primary protection certificate increased by 20%.