Fixed protection 2012

What is fixed protection 2012?

Following the reduction in the lifetime allowance in 2012 from £1.8 million to £1.5 million, fixed protection 2012 was introduced and was available to individuals who had accrued pension benefits up to 5 April 2012 and from that date, had no contributions paid to any registered pension schemes and ceased active membership of any final salary defined benefit schemes.

This gave the individual a personal lifetime allowance of £1.8 million.

When could you apply for fixed protection 2012?

Up to 5 April 2012, an individual who did not have either enhanced or primary protection could register for fixed protection 2012 (FP2012), if they wanted to retain the then standard lifetime allowance (LTA) of £1.8 million as their personal lifetime allowance rather than accept the reduction of the standard lifetime allowance to £1.5 million with effect from 6 April 2012.

For fixed protection 2012 to remain valid, the individual must have no ‘benefit accrual’ in any of their registered pension schemes on or after 6 April 2012.

Benefit accrual includes personal and employer contributions to money purchase schemes such as self invested personal pensions (SIPPs) and small self administered schemes (SSASs) and benefit accrual in a defined benefit or cash balance scheme above a certain amount.

An individual cannot give up fixed protection 2012 but if they lose it – e.g. because they have benefit accrual – they must write and tell HMRC of this within 90 days of the protection being lost.

If, the standard lifetime allowance had increased to more than £1.8 million, fixed protection 2012 would have ceased and be replaced with the higher standard lifetime allowance.

Can fixed protection 2012, be lost?

Fixed protection 2012 can be lost in the following circumstances:

• where the individual has ‘benefit accrual’ on or after 6 April 2012
• a transfer of an individual’s benefits from one scheme to another that does not qualify as a ‘permitted transfer’, e.g. a transfer from a money purchase scheme to a defined benefit or a cash balance pension scheme. (Permitted transfers include transfers from defined benefit schemes to money purchase schemes and transfers between money purchase schemes subject to satisfying certain requirements)
• becoming a new member of a pension scheme and having relevant benefit accrual – please see auto-enrolment.

A transfer of rights from an individual’s pension scheme for an ex-spouse to another scheme following a pension sharing order on divorce, does not cause loss of the individual’s Fixed Protection 2012 provided the transfer is a permitted transfer.