Pension schemes: value your pension for individual protection 2016
Work out the value of your pension to apply for protection from the lifetime allowance reduction in 2016.
Overview
To apply for individual protection from the 2016 reduction in lifetime allowance you need to tell HMRC the:
- income you’ve taken from pensions before 6 April 2006
- lifetime allowance you used between 6 April 2006 and 5 April 2016
- value of pensions you have not taken yet
- money (which gained UK tax relief) you put into an overseas pension between 6 April 2006 and 5 April 2016
If your pension scheme administrator cannot provide this information you’ll need to work it out.
To do this you may need to work out if you’ve taken any money from the pension scheme — known as a benefits crystallisation event (BCE).
The application deadline for Individual Protection 2016 is 5 April 2025. The lifetime allowance was abolished from 6 April 2024. Therefore, the level of protection will apply to an individual’s lump sum allowance and lump sum and death benefit allowance.
Income taken from pensions before 6 April 2006
This is known as amount A, and is the annual rate at 5 April 2016.
If you had more than one pension in payment on 5 April 2006, you should include the total of the values of each pension.
Where a BCE has occurred, you’ll need to know the standard lifetime allowance for:
- 5 April 2016
- the date of the BCE
| Tax year | Standard lifetime allowance |
|---|---|
| 2024 to 2025 | The lifetime allowance was abolished with effect from 6 April 2024. |
| 2023 to 2024 | £1,073,100 |
| 2022 to 2023 | £1,073,100 |
| 2021 to 2022 | £1,073,100 |
| 2020 to 2021 | £1,073,100 |
| 2019 to 2020 | £1,055,000 |
| 2018 to 2019 | £1,030,000 |
| 2017 to 2018 | £1,000,000 |
| 2016 to 2017 | £1,000,000 |
| 2015 to 2016 | £1,250,000 |
| 2014 to 2015 | £1,250,000 |
| 2013 to 2014 | £1,500,000 |
| 2012 to 2013 | £1,500,000 |
| 2011 to 2012 | £1,800,000 |
| 2010 to 2011 | £1,800,000 |
| 2009 to 2010 | £1,750,000 |
| 2008 to 2009 | £1,650,000 |
| 2007 to 2008 | £1,600,000 |
| 2006 to 2007 | £1,500,000 |
Pensions other than drawdown pensions
If you have not had any BCEs since 6 April 2006, multiply the annual rate due to you at 5 April 2016 by 25.
If you’ve had a BCE since 6 April 2006:
- Multiply the annual rate due to you at the date of your first BCE by 25.
- Multiply this by the lifetime allowance at 5 April 2016.
- Divide it by the lifetime allowance at the date of the BCE.
Drawdown pensions without BCEs
For individual protection 2016 you should multiply 80% of the annual rate due to you by 25.
The annual rate is different depending on the type of drawdown pension at 5 April 2016:
- capped drawdown — use the maximum amount of capped drawdown pension you could take for the year
- flexi-access drawdown (previously flexible drawdown) — use the maximum amount of capped drawdown pension you would have got for the year the flexible drawdown declaration was accepted by the scheme administrator had that declaration not been made
- capped drawdown fund converted to flexi-access drawdown between 5 April 2015 and 6 April 2016 — use the maximum annual amount of capped drawdown pension that you could have got in the year of the conversion had that conversion not happened
Drawdown pensions with BCEs
If you’ve had a BCE:
- Multiply the annual rate due to you by the standard lifetime allowance on 5 April 2016.
- Divide it by the standard lifetime allowance at the date of the BCE.
The annual rate is different depending on the date of the BCE.
If the BCE was before 6 April 2011 you should use the maximum annual amount you could have been paid in the year of the first BCE.
If the BCE was 6 April 2011 to 5 April 2015, for:
- capped drawdown pensions — use the maximum amount you could have been paid as capped drawdown pension in the year of the first BCE
- flexible drawdown pensions — use the maximum annual amount you could have been paid as capped drawdown pension immediately before the BCE had a flexible drawdown declaration not been made
Where the BCE was 6 April 2015 to 5 April 2016, for:
- capped drawdown pensions — use 80% of the maximum amount you could have been paid in the year of the first BCE
- flexi-access drawdown (previously flexible drawdown) — use 80% of the maximum annual amount that you could have been paid as capped drawdown pension immediately before the BCE if a flexible drawdown declaration had not been made
- flexi-access drawdown but previously capped drawdown — use 80% of the maximum annual amount of capped drawdown pension that you could have got in the year of the conversion had that conversion not happened
More information is available on the different types of drawdown pensions and the different taxation limits that apply to both.
Lifetime allowance used between 6 April 2006 and 5 April 2016
This is known as amount B, where you should:
- Take the lifetime allowance at 5 April 2016 and divide it by the lifetime allowance at the date of the BCE.
- Multiply this by the BCE amount.
- Repeat for each BCE and total the amounts together.
Pensions you’ve not taken yet
This is known as amount C.
Add together:
- The actual value of any money purchase arrangements (known as a defined contribution fund) at 5 April 2016.
- The amount of annual payment at the relevant protection date for any defined benefits pensions you’ve built up, multiplied by 20. If you can take a separate lump sum (but do not have to for your pension to be paid) you should add the value you’ve built up to that date.
- Insurance contracts included in your pension savings, which should be valued in line with the protocol of the Association of British Insurers.
- The actual value of the policy for any cash balance arrangements at 5 April 2016.
Do not include the value of any death benefit in this calculation.
This calculation assumes that the values will not change because of age or health.
Money put into overseas pensions between 6 April 2006 and 5 April 2016
This is known as amount D.
If you’re a relieved member of a relieved non-UK pension you’ll need to include the total amount you contributed that gained UK tax relief between 6 April 2006 and 5 April 2016.
This is called the untested portion.
Updates to this page
Published 27 July 2016Last updated 6 April 2024 + show all updates
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Guidance updated, as lifetime allowance was replaced by lump sum allowance on 6 April 2024.
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The 2023 to 2024 standard lifetime allowance has been added.
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The 2022 to 2023 standard lifetime allowance and a link to information about when you can lose lifetime allowance protection has been added.
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The 2021 to 2022 standard lifetime allowance has been added.
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The 2020 to 2021 standard lifetime allowance has been added.
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The 2019 to 2020 standard lifetime allowance has been added.
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Rates, allowances and duties have been updated for the tax year 2018 to 2019.
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Amendments to reflect you can no longer apply for individual protection 2014.
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First published.