Lifetime allowance is reducing from 6th April 2012 - secure the higher rate whilst you can

The standard lifetime allowance (SLA) is the maximum total amount that can be held in pensions, where no transitional relief applies.

In 2011/12 the SLA is £1.8m - this will be reduced to £1.5m on 6th April 2012 as part of the Governments plans to restrict pension tax relief.

 

If your total funds exceed the SLA the Government has confirmed the SLA tax charge will remain at 55% if paid as a lump sum and 25% if paid from annual pension income.

If you are likely to be disadvantaged by this change you can elect for a form of transitional protection which is known as fixed protection - this MUST be applied for before 5th April 2012.

Fixed protection allows you to secure the SLA at £1.8m, BUT there are some conditions:

• there can be no new contributions paid into any money purchase arrangement
• individuals must register using an HMRC prescribed form for fixed protection by 5th April 2012
• you cannot establish a new registered pension scheme unless it is to receive a transfer of existing pension rights, otherwise fixed protection will be lost

It will therefore be imperative individuals who beleive they may be affected by these changes take urgent independent advice.