The Government has confirmed it will introduce an individual protection regime next year following the decision to cut the lifetime allowance for tax-free pension savings from £1.5m to £1.25m.
Chancellor George Osborne announced plans to cut the annual allowance from £50,000 to £40,000 from April 2014 in his Autumn Statement in December. He also confirmed the lifetime allowance will fall from £1.5m to £1.25m from the same date.
At the time, the Government said it will introduce a new fixed protection regime to make sure people who have already built up pension savings worth more than £1.25m are not hit with retrospective tax charges. Under this regime, people will not be allowed to accrue additional pension benefits.
The Government also floated the idea of introducing a new individual protection regime to allow people who have pensions worth more than £1.25m on 6 April 2014 to continue to accrue benefits up to £1.5m.
The Budget confirms a consultation will be published in the spring setting out how individual protection will work. It says: “The Government will offer an individual protection regime, in addition to a fixed protection regime, for individuals with pension rights above £1.25m when the standard lifetime allowance is reduced from £1.5m to £1.25m for 2014/15 and subsequent years.”