Fixed Protection 2014 (FP2014) – Now Closed

From 6th April 2014 the lifetime allowance, the total value you were allowed to have in all your pensions reduced from £1.5m to £1.25 million.

The Government has realised that there were people that had built up more than this, or may have done so and offered a ‘lifeline’. If you had already built up pension savings of more than £1.25 million or had planned to do so, they provided Fixed Protection 2014 (FP2014).

FP2014 allowed you to ‘ring fence’ your pot value up to £1.5 million without paying the lifetime allowance charge, although the ability to accrue future benefits is very limited. If, in the future, the standard lifetime allowance rises to more than £1.5 million, you will no longer need to rely on FP2014 and instead your lifetime allowance will be the higher standard lifetime allowance. Any amount over £1.5m will suffer the Lifetime Allowance charge.

You could have applied for FP2014 if you did not already have Fixed Protection 2012, Primary Protection or Enhanced Protection. You do not need to have already built up pension savings of more than £1.25 million to apply.

What are the rules?

To have applied for FP2014 you must have met certain conditions. These were that you:

  • were a member of a registered pension scheme
  • did not have Primary Protection
  • did not have Enhanced Protection
  • did not have Fixed Protection 2012

Once you have FP2014 to keep it there are restrictions, the main one being that you will normally need to stop paying into your current scheme. It is therefore important that you give your scheme administrator (or employer) enough notice if you want to stop your active membership.

If you leave this notification to the last minute then your accrual or contributions may not cease before 6th April 2014 and you maylose your FP2014. As a result, your lifetime allowance will be the standard lifetime allowance of £1.25 million and if your benefits are worth more than this when you take them, you will be liable to a lifetime allowance charge.

Then to keep FP2014 you:

  • cannot start a new arrangement under a registered pension scheme other than to accept a transfer of existing pension rights
  • cannot have benefit accrual within the allowable rules
  • will be subject to restrictions on where and how you can transfer benefits

If you break one of these conditions then you will lose your FP2014. You also MUST inform HMRC that you have lost FP2014 and you have ONLY 90 days of an event leading to the loss of FP2014 to do this. If you don’t, then you will be liable to penalties of up to £300 for failure to notify and daily penalties of up to £60 per day thereafter.

As with most rules governing how you deal with the revenue (HMRC), it is your responsibility to communicate with them. You cannot say ‘they didn’t tell me’ – this reason is no longer valid or allowable.

FP2014 applications had to have been in place before 6th April 2014. Those received by HMRC after 5th April 2014 were not accepted.

HMRC provided a certificate with your unique reference number and stating that you are entitled to FP2014. It is really important that you keep this certificate safe.