The Lifetime Allowance reduced from £1.5 million to £1.25 million on 6th April 2014. For those of you that have been in the NHS scheme for some time and with significant pensionable earnings, there is a real possibility that the Lifetime Allowance will be exceeded. For those of you that are close to the lifetime limit, you may have registered for ‘Fixed Protection’ before April 2014. Fixed protection is only effective if any further accrual is within statutory limits which, for the NHS scheme, is effectively an increase in pensionable earnings above the Consumer Prices Index (CPI). In a practical sense, the only certain way to avoid breaching the limit is to come out of the scheme or retire early.
Anyone with a pension over £1.25 million at 5th April 2014 can apply for ‘Individual Protection’ later this year, giving you your own Lifetime Allowance limit, the main difference being that you are able to continue to accrue benefits under the scheme. Excess benefits are taxable at 55% as a lump sum or an additional 25% tax on your rate of income tax.
For those with significant personal pension funds, there is another alternative available whereby you are able, in certain circumstances, to allocate future growth to other family members rather than you paying additional tax on the fund. Those close to the limit may welcome the opportunity of sharing the future growth of their fund with their family rather than paying yet more tax on their hard earned income. There is a unique facility available through one of the leading insurance companies and the planning necessitates advice from a suitably qualified and authorised Financial Adviser. Please contact us for advice and guidance.