{"id":19693,"date":"2019-10-17T12:58:51","date_gmt":"2019-10-17T12:58:51","guid":{"rendered":"https:\/\/smh.group\/?p=19693"},"modified":"2023-02-15T13:39:18","modified_gmt":"2023-02-15T13:39:18","slug":"could-your-protected-pension-allowance-tip-over-the-edge","status":"publish","type":"post","link":"https:\/\/devstagesite.co.uk\/smhgroup\/could-your-protected-pension-allowance-tip-over-the-edge\/","title":{"rendered":"Could your protected pension allowance tip over the edge?"},"content":{"rendered":"\n

An obscure adjustment to old pension benefits,\nmandated by the courts, might cost some pension owners many thousands in\nadditional tax. <\/strong><\/p>\n\n\n\n

The problems caused by the tapering of the annual allowance have been making the pension<\/a><\/span><\/strong> headlines for some time. Whereas the original focus was on NHS consultants and doctors, the issue is now rippling through other higher paid parts of the public sector, such as the senior levels of the armed forces and civil service. The government has started to suggest reforms, but these have concentrated on tweaking membership of the pension schemes involved rather than reforming the pension tax legislation. <\/p>\n\n\n\n

Another pension allowance conundrum is now looming, this time involving the lifetime<\/em> allowance, which effectively sets the maximum tax-efficient value of all your pension benefits. The lifetime allowance has been reduced on three occasions, bringing it down from \u00a31.8m in 2011\/12 to \u00a31.0m in 2016\/17. <\/p>\n\n\n\n

On each occasion the cut was accompanied by the launch of a \u2018fixed\nprotection\u2019 option, allowing those affected to retain the existing allowance.\nSo, for example, the 2012 version of fixed protection allowed the \u00a31.8m\nlifetime allowance to be retained.<\/p>\n\n\n\n

However, there was an important condition attached to all these fixed\nprotections: they are lost if any additional contributions are made or any\nbenefits are increased beyond the pension scheme\u2019s normal indexation rules. At\nworst, an extra \u00a31 of pension could see a fixed protected lifetime allowance of\n\u00a31.8m reduced to the current standard lifetime allowance of \u00a31.055m. In an\nextreme case, that could create an extra tax liability of over \u00a3400,000. <\/p>\n\n\n\n

In theory the restriction\nmeans anyone with fixed protection should studiously avoid any risk of falling\ninto that extra pension trap. In practice, some people \u2013 particularly the\nnon-advised \u2013 forget or are unaware of the pitfall. <\/p>\n\n\n\n

Now there is another potential\ndanger, even for the diligent. An arcane 2018 High Court ruling on how to deal\nwith equalisation of certain state-related pension benefits from the 1990s\nthreatens to make automatic small increases to the benefits of some members of\nfinal salary pension schemes. Potentially enough to tip some over the\nthreshold.<\/p>\n\n\n\n

The situation now is that:<\/p>\n\n\n\n