Chancellor George Osborne announced in the 2012 Autumn Statement that from April 2014, the LTA on tax relieved pension savings will reduce from £1.5m to £1.25m, and the annual allowance (AA) will fall from £50,000 to £40,000.
Osborne said at the time the government would consult on forms of protection for people whose savings are already close to or have exceeded £1.25m.
In the consultation HMRC proposed two new protections: fixed protection 2014 (FP14) and individual protection.
FP14 would entitle savers to an LTA of £1.5m, subject to them making no further pension contributions after April 2014. Individuals would have to apply for this protection by 6 April 2014.
The consultation said: “In effect, this means individuals with FP14 are likely to need to opt out of active membership of all UK tax relieved pension schemes if they want to maintain this protection.”
Individual protection would entitle savers to a personalised LTA, based on the value of their savings at 5 April 2014, up to £1.5m.
These individuals would be allowed to continue making contributions without triggering an LTA charge on their pre-2014 savings, but would pay LTA charges on additional savings. Individuals would have three years from 6 April 2014 to apply.
The move comes after concerns were raised by industry figures over the impact of auto-enrolment on individuals’ pensions tax planning. The consultation runs from 10 June to 2 September, follow our HMRC link on our home page.