Enhanced protection
Enhanced Protection provided protection to the full value of an individual's pension fund before 6 April 2006.
What is enhanced protection?
Enhanced protection was introduced by the Finance Act 2004 for individuals who had accrued pension benefits up to 5 April 2006 and from that date, had no contributions paid to any registered pension schemes and ceased membership of any final salary defined benefit schemes.
The pension funds of a pension scheme member with enhanced protection are tested against the lump sum and death benefit allowance (LSDBA). The member's LSDBA is set at the value of their uncrystallised funds as at 5 April 2024. The member's LSDBA is reduced by any tax-free lump sums (including serous ill-health lump sums) they have taken in their lifetime. Please see our guide on pension scheme benefit allowances for more information.
When could you apply for enhanced protection?
Up to 5 April 2009, an individual could register for enhanced protection with HMRC whatever the total value of their pension savings in registered pension schemes as on 5 April 2006, provided they have no ‘relevant benefit accrual’ in any of their pension schemes on or after 6 April 2006. Therefore, those who registered not only included those with total pension savings at that date in excess of the new standard lifetime allowance (LTA) of £1.5 million but also those who believed that their pension savings, with investment growth alone, could exceed the standard LTA when they came to take their benefits in the future.
- Relevant benefit accrual included personal and employer contributions to money purchase schemes such as SIPPs and SSASs and benefit accrual in a defined benefit or cash balance scheme above a certain amount.
- With effect from 6 April 2023 it has been possible for members to have relevant benefit accrual without breaking enhanced protection, provided that enhanced protection had been confirmed by HMRC prior to 15 March 2023.
Can enhanced protection be lost?
Enhanced protection could be lost if the member obtained it on or after 15 March 2023 and, for example, relevant benefit accrual took place.