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HMRC weighs scrapping pension protection deadlines

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HMRC is considering removing the deadlines for applying for fixed and individual protection on the pensions lifetime allowance.

In the summer Budget earlier this month, the Government confirmed the lifetime allowance will fall from £1.25m to £1m from April 2016.

As was the case in the past when the allowance was dropped, individuals will be able to apply for protection.

However in its July newsletter the tax office says it will consider options to remove the deadlines for applying.

Currently individuals have to notify HMRC in advance if they want to apply for fixed protection or have three years to apply for individual protection.

HMRC will be discussing the changes with stakeholders over the next few weeks and publish the changes later this summer.

Individuals applying for fixed protection must have stopped contributing before 6 April 2016, while those applying for individual protection must have savings of at least £1m on 5 April 2016.

Talbot and Muir head of pensions technical Claire Trott says: “It would appear that there may be no need to apply for fixed protection in advance, just when it is going to be relied on. This shouldn’t be too much of a problem because there is no need for a valuation at 5 April 2016, they would just need to confirm that they haven’t breached the accrual limits and haven’t made any contributions.

“The removal or extension of the application deadline for individual protection could be more of an issue because in order to rely on it, a valuation or benefit calculation is needed as at the 5 April 2016 and this could be increasingly hard to get the longer it is left.”

The newsletter also clarifies changes made to pension input periods. Dentons Pension Management director of technical services Martin Tilley says the issue produced the greatest number of adviser enquiries of any topics “for several years”.

He says: “The initial technical note was open to interpretation and confusion in connection with the alignment of pension input periods and remaining annual allowances which were dependent on individuals’ pre-alignment contributions. The clarification and additional example is therefore welcomed.”

From next year all PIPs will begin on 6 April and last for 12 months.

All PIPs open on 8 July 2015 will end on 8 July 2015. The next PIP will be 9 July 2015 to 5 April 2016.

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