Standard Life is warning that savers who failed to protect their tax-free cash when the lifetime allowance was introduced could see their available non-taxable pension lump sum drop by £75,000 from April.
The Government first introduced a lifetime allowance for tax-privileged pension saving on April 6, 2006. The initial allowance was £1.5m for the 2006/07 tax year, rising to £1.8m in 2010/11.
From A-Day, investors with pension pots worth more than the lifetime allowance were able to claim primary protection on both their pension fund and their 25 per cent tax-free cash but some investors chose to protect just their pension fund.
In December, the Government confirmed plans to cut the lifetime allowance from £1.8m to £1.5m from April 6, 2012, reducing the maximum tax-free cash available without protection from £450,000 to £375,000.
Standard Life head of pensions policy John Lawson says: “Some clients who took primary protection at A-Day did not have tax-free cash protection. For these people, taking their benefits before next April could net them an extra £75,000 tax-free cash.”
AWD Chase de Vere head of communications Patrick Connolly says: “There will be clients who could fall foul of this.”