Colin Batchelor, head of pensions technical at Legal & General Savings, explains how to protect your clients' pension pots from the upcoming lifetime allowance (LTA) reduction.
Without protection the taxman could end up getting up to £165,000 extra from an individual’s pension fund unless action is taken now. On 6 April 2012, the lifetime allowance (LTA) will be reduced by £300,000 from £1.8m to £1.5m, with a 55% tax charge on any excess benefits taken as a lump sum or 25% if providing a taxable income. By applying for fixed protection both the £1.8m LTA and up to £450,000 (25% of £1.8m) in tax-free cash entitlement can be protected, rather than the lower cash figure of £375,000 (25% of £1.5m). A fixed protection certificate can be obtained by simply comp...
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