Changes to drawdown limits set out in yesterday's Budget give advisers just two weeks to reassess and take necessary action for clients needing fixed protection 2014, according to Dentons.
As part of radical reforms to retirement income George Osborne confirmed that from 27 March the GAD uplift will increase from 120% to 150%.
However, Dentons warned the new uplifted GAD could result in more people needing to apply for fixed protection, leaving advisers just a two week window to take action.
Dentons director of technical services Martin Tilley explained the shift to 150% would probably become effective from the first pension year anniversary following 27 March.
He told Professional Adviser: "However, it will be a temporary measure only, as if the proposals to permit unlimited drawdown become effective from April 2015 there will be no need to refer to GAD tables from that point on.
"It remains to be seen how the drawdown limits will impact on the lifetime allowance (LTA). The benefit crystallisation events referring to purchase of annuity or reaching age 75 will become redundant and clients will be able to draw out funds more quickly and thus potentially prevent any LTA breaches."
Tilley (pictured) added: "This follows through though to the current regime and application for fixed protection 2014 (FP 2014). In order to assess and value the capital value of pre A Day drawdown, we are currently required to use the maximum value as determined by 120% GAD."
He explained that someone with a pot that currently provides drawdown of £30,000 a year using 120% GAD would have a value for the purposes of testing against the LTA of £750,000 (25 times the max GAD pension payment)
"However as the uplift increases to 150% GAD, the value of that pre A Day pension for purposes of test against the LTA increases to £937,500. Clients and advisors have only two weeks to reassess any parties that may be affected by this late notice change," warned Tilley.
Two weeks to take action
"I doubt very much that the Treasury/HMRC thought the announced changes through, giving individuals and advisors only two weeks to reassess and take action on any new people needing FP 2014."
Talbot & Muir head of technical support Claire Trott said she did not believe this would be the case for all but it could happen "in some cases".
She said: "The 150% applies to those pension years beginning on or after 27 March. The uplift will only apply at the anniversary of the drawdown. So if someone was to want to use the lower limit to set against the LTA then they could crystallise before the anniversary, so the multiple is applied to the 120% level. This has been an ongoing issue for some since the uplift from 100% to 120% over the last year also."
She added: "I feel that advisers who have been looking at their clients who are in pre A Day drawdown and not contributing would likely have applied for fixed protection in any case and this increase will not be a major issue for most.
"If they decide that it has brought a few extra clients to the levels that they need fixed protection 2014 then a simple online form will mean that is they timescales should not be an issue."
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