Protecting your Lifetime Allowance

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 had been reducing steadily  

The last major change was in the 2022/23 Budget where the Allowance was effectively removed.

When, in previous years the LTA was reduced the Government at the time allowed members of pensions to ‘ring-fence’ the value at that time, protecting it against the sudden drop in the Allowance. 

Although there is currently no need for this protection for the Lifetime Allowance it is still potentially of value for the lump sum (PCLS).

When the benefits are taken at retirement, a Lifetime Allowance charge will apply to any amount of lump sum that exceeds your Standard or Personal Lifetime Allowance.

The Protections

There are 7 main protections that we will look at in this section: