Primary Protection – Now Closed

You needed to have applied and received this by the 6th April 2009. This protection can still be held and used however, it may impact upon your ability to hold the other forms of pension protection.

How it works:

Primary Protection was only available to you if the total value of all your pension arrangements exceeded the standard LTA of £1,500,000 at 5th April 2006. At that point HMRC calculated an enhancement factor based on the actual capital value of all your pension benefits.

Primary Protection gave you an enhanced Lifetime Allowance, which means you can have more pension savings without paying the Lifetime Allowance charge.

You can still make contributions if you have Primary Protection but not if you have Enhanced Protection.

What is the Personal Lifetime Allowance?

To calculate the Primary Protection enhancement factor, HMRC use the following formula:

(RR – SLA) / SLA

  • RR = the capital value of your pension rights at 5th April 2006
  • SLA = the Standard Lifetime Allowance at 5th April 2006 of £1,500,000

Primary Protection does not increase an individual’s available tax-free lump sum unless they have a protected lump sum.

So let’s look at a couple of examples:

Example 1:

Capital value of all pension arrangements at 5th April 2006 = £1,600,000

£1,600,000 – £1,500,000 = £100,000 / £1,500,000 = 0.066 = 0.07 (2 decimal places)

Example 2:

Benefits for the 1995 Section for tax year 2008/2009

Standard Lifetime Allowance is £1,650,000

Primary Protection Enhancement Factor 0.07

Personal Lifetime Allowance is £1,650,000 x 0.07 = £115,500 + £1,650,000 = £1,765,500

Capital value of benefits already in payment elsewhere is £50,000

NHS Lump Sum Payment is £225,000

NHS Capital Value of Pension p.a. is £76,000 x 20 = £1,520,000