Don’t die before August

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Published: 05 Apr 2016 Updated: 28 Jan 2017

Don’t die before August

Today sees yet a further cut to the lifetime allowance, with the value of tax relieved pension benefits an individual is entitled to accrue during their lifetime, reduced to £1m. Gary Smith, Financial Planner at Tilney Bestinvest, delves into the impact that this reduction will have.

Lifetime Allowance nadir?

“This represents the third such cut that the Chancellor has introduced to this allowance during his term in office, with the limit being slashed from a peak of £1.8m in April 2011 to £1m now, a reduction of 44%. Whilst the Chancellor has confirmed that the lifetime allowance will be subject to inflation linked increases from April 2018, implying the allowance has now reached ground zero – that’s not to say a firm commitment to rule out further reductions.

“As with previous reductions to the lifetime allowance, new protections will be introduced to enable those pension savers who will be affected to preserve lifetime allowances that exceed the standard £1m level. The two protections that are to be introduced are ‘Fixed Protection 2016’ and ‘Individual Protection 2016’, with those affected able to apply for both if required.

“Fixed Protection 2016 will enable an individual to retain a lifetime allowance of £1.25m, but in exchange for securing this limit they won’t be permitted to make pension funding beyond 6th April 2016. This protection will be available to all pension savers, regardless of whether or not their pension benefits exceed £1m.

“Individual Protection 2016 will only be available to those pension savers who have pension benefits that exceed £1m on 5th April 2016. For those who do qualify, their lifetime allowance will be set at the value of their pension benefits on 5th April 2016, subject to a maximum of £1.25m. Unlike Fixed Protection, those who apply for Individual Protection will be able to continue to make pension funding in the future without losing the lifetime allowance they secure on 5th April 2016.

“Whilst these protections are welcome, and will certainly be used by many individuals who are affected, due to the legislation still to receive Royal Ascent, the actual applications for the new protections are not expected to be made available until July 2016. This creates a three to four month holding period where those who intend to apply for one or both of these protections actually retire prior to securing the protection they need to avoid and/or reduce any lifetime allowance tax charges being levied.

Act now to protect your reserves

“HMRC have encouraged those who do intend to apply for these protections to write to them registering their intention and they will then issue a temporary certificate that will expire on 31st July 2016, by which point they will be able to apply for a permanent certificate. This should prevent those who do retire during this period incurring unnecessary lifetime allowance tax charges, but they must ensure that they still apply for the permanent protection when it does become available.

“This will certainly benefit those individuals who do intend to retire prior to July but, we would also strongly encourage all those who don’t intend to retire during this period to register their intention with HMRC as soon as possible. This means that should the unthinkable happen and the individual dies, it will offer the individual provisional protection. Indeed, by securing the temporary certificate it will create an audit trail that identifies to HMRC that they were going to apply for these protections prior to their death.

“So, whilst we clearly can’t confirm the date of your death, we would strongly encourage those who do intend to apply for either of these protections to apply for temporary certificates as a matter of urgency to avoid any unnecessary tax charges being levied on their death before July 2016.

“A further point of note is that, for those who will be applying for Fixed Protection 2016, they must ensure that pension funding ceases from 5th April 2016 and not July 2016, as any payments made after 5th April 2016 will make this protection unavailable to them, potentially costing thousands in tax charges.”

To discuss this or any other financial planning topic please contact Gary Smith on 0191 269 9971 /

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Important Information:

The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested. This press release does not constitute personal advice. If you are in doubt as to the suitability of an investment please contact one of our advisers.

Prevailing tax rates and reliefs are dependent on your individual circumstances and are subject to change. Please note we do not provide tax advice.

Before accessing your pension it is important to consider all of your options therefore you should seek professional financial advice or visit

Press contacts:

Jason Hollands
0207 189 9919 / 07768 661382

Gillian Kyle
0203 818 6846 / 07989 650 604


This release was previously published on Tilney Smith & Williamson prior to the launch of Evelyn Partners.