By Dr Graham Brown, Forth Capital
In my last blog I discussed the importance of the Lifetime Allowance in pension valuations. Now I will take a look at Lifetime Allowance Protection.
The concept of Lifetime Allowance and subsequent protection was introduced after ‘A’ Day in 2006. At this point, it was possible to apply for protection against a potential lifetime allowance charge. If you applied successsfully, you will have received a certificate from HM Revenue & Customs. If you have enhanced and primary protection you will have only one certificate. Enhanced protection will apply unless it is revoked or lost; however, it is no longer possible to apply for enhanced or primary protection. The advantage of this protection is that you will be able to crystallise your pension by moving to a Recognised Overseas Pensions Scheme (ROPS) without paying any Lifetime Allowance Charge. This is a substantial benefit for large pensions.
If the value of your UK pensions is at or near the Lifetime Allowance now (currently £1.25 Million and set to drop to £1 Million in April 2016) and you haven’t filed for protection, it is a good idea to apply to HMRC. Remember that if your pension is currently valued at £712,000, it will hit the £1 million level at 7% growth after only 5 years. The benefit of protection is that you will only have to pay the Lifetime Allowance Charge (25% to 55%) on the excess over and above your protection level. There is currently no cost for applying and the process can be completed online through the HMRC web site.
With Individual Protection 2014, it is possible to apply for individual protection against the drop in the lifetime allowance to £1.25 million. This enables you to set your allowance at the value of your pensions at 5 April 2014, up to £1.5 million, and continue to make contributions. When your pension is measured against the lifetime allowance, you use up a percentage of your personalised lifetime allowance. It is possible to have both fixed and individual protection 2014, however it is not available if you already have primary protection, including if held with enhanced protection.
You can apply on the HMRC website until 5 April 2017. For 2016 Protection it is expected that people will be able to apply for protection from the lifetime allowance fall to £1 million in 2016. Details will be available from Forth Capital in the near future.
Author's bio
Dr Graham Brown has over 30 years’ experience in the Financial Services Industry throughout Asia, the Middle East and Europe. Working for a number of major Financial Institutions including Old Mutual, Credit Lyonnais and Jardine Fleming, Graham has vast experience in managing an array of diverse businesses. Graham joined Forth Capital in 2012 to set up and manage the Hong Kong subsidiary.
Graham specialises in pension transfers, inheritance tax planning and all aspects of personal finances. Having been an expat throughout the last 30 years, Graham has a strong understanding of the expatriate market and an array of personal experience.
Graham is UK qualified, with a Level 4 Diploma in Regulated Financial Planning and is a registered Chief Executive with the Hong Kong Confederation of Insurance Brokers and registered with the Hong Kong Securities and Futures Commission as a Responsible Officer. Graham holds a BSc and PhD in Marine Biology.
Qualifications
- UK FSA Level 4
- HK SFC Investment Adviser
- HK CIB Technical Representative
- HK CIB Chief Executive
