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HMRC delays pension protection applications

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Pension savers who want to be apply for transitional protection as the lifetime allowance on pensions drops to £1m will have to wait for at least seven months, HMRC has confirmed.

A HMRC newsletter, published yesterday, says it will “not be possible” for members to apply for fixed or individual protection until after April 2016.

It says: “This means that individuals cannot notify us of their intention to rely on Fixed Protection 2016 in advance.

“Individuals who want to rely on FP2016 need to start thinking about what arrangements they need to make to stop accruing benefits after 5 April 2016.”

An HMRC spokeswoman says: “Pension protections will be effective from April 2016, once an individual applies and is successful.”

AJ Bell head of technical resources Gareth James says: “It has been possible, in fact it has been required, to apply for the previous versions of fixed protection before the 6 April from which they’ve taken effect.

“This time, individuals won’t be able to apply until after it has taken effect, so some individuals who were intending to rely on Fixed Protection 2016 are potentially not going to be able to take benefits for a period after 6 April 2016, or are going to face complications with the lifetime allowance.

“It may also increase the risk that someone will forget to stop making a contribution that will invalidate the fixed protection, because they won’t have obtained the relevant form of protection which would act as the reminder to stop paying in.”

The application process for fixed and individual protection will be entirely online and certificates will not be issued. HMRC is to publish further details later this month.

Talbot and Muir head of pensions technical Claire Trott says: “In the end it will make it easier for members to get an immediate reference number to use and take some of the burden off HMRC.

“But those that may want to rely on Fixed protection 2016 before this has been launched will surely have to wait to access their benefits, which isn’t exactly fair.”

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