Protecting your Lifetime Allowance
What is It?
Over the years since pension A-Day legislation in 2006 and subsequent scheme changes in 2008 and 2015 the one constant in pension terms has been change.
Many members of the NHS, like you, will have had a plan on how and when they are going to retire. Many will have set up pension provisions to fit in with this plan, whether that be solely the NHS scheme or additional private arrangements. Many decisions you have made up to this point will have been made with certain assumptions in mind however, these legislative and organisational changes may seem like someone has been moving the goal posts.
The main impact on this has been the Lifetime Allowance. The reduction in the total amount of money, or value (in a defined benefit scheme like the NHS) that you are allowed to hold in all your pensions has been reducing steadily The last major change was in the 2016/17 Budget where the Allowance was reduced to £1m, held at that level for two years and then increases were re-introduced each year by the rate of inflation (CPI).
There are two types of Lifetime Allowance. The one noted above is known as the Standard Lifetime Allowance (SLTA) however, if you have made use of one of the previously available pension protections you have ruing-fenced higher benefits this is known as a Personal Lifetime Allowance (PLTA).
When the benefits are taken at retirement, a Lifetime Allowance charge will apply to any amount that exceeds your Standard or Personal Lifetime Allowance.
Whenever changes have come into effect over the years, with regard to how pensions are treated, the relevant Finance Acts have always permitted certain caveats or protections to allow people to plan for the pension goal posts being moved.
6th April 2006
Pensions were simplified in 2006 and a Lifetime Allowance was introduced, the initial level being £1.5m. At that time, anyone could have applied for either or both Primary and Enhanced Protection.
The LTA from 6th April 2019 is £1.055m
There are 7 main protections that we will look at in this section: