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Welfare reform

Fixed and Individual Protection 2016 and death in service benefits

In brief...
FP2016 is a transitional relief that is available to eligible individuals that are affected by the reduction in the lifetime allowance in April 2016.
FP2016 is lost if a benefit accrual arises or if an individual starts a new arrangement under a registered pension scheme.
HMRC newsletters give further details about FP2016.
Continuing the provision of defined benefit death benefits should not cause an individual to lose fixed protection.
If there is any doubt about the suitability of a scheme in relation to FP2016, seek independent professional advice.

The lifetime allowance (LTA) is reducing from £1.25m to £1 m from 6 April 2016, and
the Government is introducing 2 transitional protections from that date, Fixed Protection
2016 (FP2016) and Individual Protection 2016 (IP2016).

The transitional protections are similar to Fixed Protection 2014 and Individual Protection
2014. A new digital service is being provided for individuals to apply for the protections
from July 2016. There is no formal deadline for applying for protection, but if individuals
intend to rely on a protected LTA they will need to have applied and obtained a reference
number from HM Revenue and Customs (HMRC) before they start taking any benefits

Individuals who already have Primary Protection, Enhanced Protection or Fixed Protection 2012 or 2014 cannot apply for FP2016, but will continue to benefit from their existing protection from the LTA tax charge. They do not need to take any further action.

FP2016 may be lost if a benefit accrual arises under a registered pension scheme.
This can include making further contributions, or benefits increasing by more than the
‘relevant percentage’ defined by HMRC. It may also be lost if the individual joins a new
registered pension scheme, which can include being auto-enrolled by their employer.
Your employer does not have to automatically enroll you if you give them evidence of
your LTA protection, such as a certificate from HMRC.

HMRC have previously confirmed that continuing the provision of defined benefit death
benefits will not be deemed to be a benefit accrual.

IP2016 is only lost if a pension debit (as a result of a pension sharing order) reduces the
amount of the individual’s protected LTA below the standard LTA.

As excepted group life schemes are not arrangements under a registered pension
scheme it is still possible to participate in an excepted group life scheme without losing
Fixed Protection.

The HMRC guidance on FP2016 and IP2016 and details about how individuals can apply
can be found here:

The information regarding taxation is based on our understanding of UK tax legislation
as at April 2016, which may be altered and depends upon the particular circumstances
of the individual. No action should be taken or refrained from being taken without prior
consultation of professional advisers.


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