Chapter 3 - Transitional Relief and Protected PCLS Flashcards
Transitional Relief
To protect pre A Day as above LTA If divorced pre April 6 06 and to protect benefits from a sharing order.
Primary Protection
Over £1.5m at 5/4/06 If benefits taken, protection not required. Valuation type depends on scheme. MP - fund on A Day. Cash balance scheme - rules of scheme. DB scheme - factor of 20:1 and PCLS added. Benefits already in payment valued at 25:1 Max value is maximum permitted pension. Protection gives a higher LTA Calculation Value of pension at
5/4/06 - £1.5m / £1.5m This added to LTA to give new LTA Added to underpinned LTA of £1.8m..always.
Enhanced Protection
For Pre A Day, regardless of value Must have stopped being active member of all approved pension schemes at 5/4/06. NO further benefits could be built up after that date or protection lost. OK if fund value grows but NO contributions. Individual is not subject to LTA charge when benefits are taken.
Fixed Protection 2012 (1.8m)
Fixed Protection 2014 (1.5m)
Fixed Protection 2016 (1.25m)
For people not registered for Primary or Enhanced or Fixed 2012 (for 2014) or Fixed 2014 (for 2016) 2012. LTA reduced to £1.5m. Could protect up to £1.8m Similar to enhanced protection rules. No further contributions. 2014 LTA reduced to £1.25m Could protect up to £1.5m Similar to enhanced rules again and fixed 2012. 2016 LTA reduced to £1m Could protect up to £1.25m Same rules….
DB Accrual allowed 9th Dec 2010 or CPI
Individual Protection 2014 1.5m
Individual Protection 2016 1.25m
For people not registered for Primary Protection and with fund over £1.25m at 5/4/14 LTA reduced to £1.25m Protect up to £1.5m No restriction on future savings or benefit accrual May still be subject to LTA charge on excess. If Primary Protection in place, NOT eligible for Individual Protection. OK if Enhanced, Fixed 2012 or Fixed 2014 in place already. Any existing takes precedence. Max PCLS is 25% of protected LTA. Applications for this must be made before benefits crystallised. LTA reduced to £1m. Exactly same as above rules re 2016 Existing protections take precedence over 2016 protection.
Protected PCLS
With Primary Protection - protected tax free cash indexed in line with increases LTA using underpinned LTA of £1.8m. If less than 25% at A Day, formula doesn’t apply. With Enhanced Protection - entitlement is protected as a % of benefit value at A Day. Still can have more than £375k (25% of £1.5m A Day LTA) when benefits taken.
£500k A day x 1.8/1.5= £600k
Scheme Specific PCLS Protection
Pre 87 regime rules. Sometimes more than 25% PCLS. Scheme has to protect, no requirement to apply to HMRC. If benefits transferred, higher entitlement will be lost.
