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The Lifetime Allowance or LTA, i.e. the cap on total pension funds accumulated during your lifetime, was abolished from April 2024.
Whilst this was great news at the time, the LTA was replaced with two new allowances, the Lump Sum Allowance (LSA) and the Lump Sum Death Benefit Allowance (LSDBA) and the deadline for increasing these two new allowances, if eligible, is fast approaching. You have until 5 April 2025 to make an application.
What is LTA Protection?
Over the years from 2012 to 2016, the government reduced the LTA but each time they allowed you to apply for LTA protection to retain a higher LTA. There are two different types of protection – Fixed Protection and Individual Protection – and both continue to apply under the new pension regime.
For some clients, applying for protection could make a positive difference for any benefits taken since 2016 and also the tax-free cash now available and/or the Lump Sum Death Benefit Allowance. The table below compares the maximums available with no LTA protection compared with Fixed Protection (FP16) and Individual Protection (IP16):
If successful, any protection will apply retrospectively from 6 April 2016, regardless of when it’s granted. You can’t apply if you already have FP12, FP14, Primary or Enhanced Protection.
What is Transitional Tax-Free Amount Certificate (TTFAC)?
TTFAC is for those who drew tax-free cash under the previous LTA framework, prior to 6 April 2024, and applying for a certificate can help increase your tax-free cash entitlement.
What Should I Do?
This area of pensions is very complicated. If you think that you could benefit from having a chat about your pensions, talk to your regular contact, or get in touch with us by calling 020 7469 6830 or emailing wealthteam@ipscap.com to discuss.
This document is issued by IPS Capital LLP of 4 Eastcheap, London EC3M 1AE; a limited Liability Partnership registered in England OC328405 and authorised and regulated by the Financial Conduct Authority (Financial Services Register 471375).
This document is for retail and professional persons and intermediaries based in the UK only. This publication does not constitute advice and you should not make any investment decision based on it. The information contained herein is correct to the best of our knowledge and we may not be held liable for any errors, inconsistencies or future amendments to tax or pension laws. This information is based on current information in respect of UK tax and pensions. IPS Capital LLP does not offer tax advice and you should seek professional tax advice for your own circumstances. Our opinions may change without notice.
