Don’t give up your pension safeguard

By Edie Bourne

Thousands of pension savers have unwittingly cancelled the protection they had put in place to guard against tax charges on their lifetime savings. 

HM Revenue and Customs (HMRC) has revealed that more than 12,000 individuals have lost one of the different types of ‘lifetime allowance’ protections in the last 12 years. 

The lifetime allowance limits the amount which can be saved into a pension free-of-tax overall. It currently stands at £1.055m but has been as high as £1.8m in 2011-12. 

Each time the Government has reduced the allowance, it has launched pension protection schemes to allow savers to preserve their previous savings allowance so long as certain criteria are met. 

Unfortunately, one of these criteria for those with a certain type of safeguard known as ‘Fixed Protection’ is ceasing all contributions to the pension or the protection becomes void.