PTM176530 - Lump sum allowance and lump sum and death benefit allowance: Individual protection: Applying for individual protection 2016
If you are looking for information about IP prior to 6 April 2024, please see the National Archives.
Applying for individual protection (IP16)
"Relevant arrangement" and "relevant amount"
Applications for IP16 must be made online
Who can make an application for IP16
Conditions required for a valid application for IP16
Will HMRC accept all applications for IP16?
Dormant applications for IP16
When HMRC may withdraw an IP16 reference number
Appeal against HMRC's refusal to issue or decision to withdraw an IP16 reference number
Notifying subsequent pension debits
What happens if the member dies before they have made an application for IP16?
Applying for individual protection (IP16)
Paragraphs 14 to 16 and 18 to 20 Schedule 4 Finance Act 2016
A member must have built up pension savings of more than £1,000,000 by 5 April 2016 to be able to apply for IP16.
An individual must make an application on or after 6 April 2016 but before 6 April 2025.
Applications for IP16 made before 6 April 2016 were invalid and were not processed by HMRC. Where a member has made an application that is invalid because it was made too early, they can resubmit their application at any time after 5 April 2016 until 6 April 2025.
If someone wants to apply for IP16 then they will need to meet certain conditions. Once a member is satisfied that they meet the conditions they can apply to HMRC for IP 2016. The conditions are that:
- they have one or more “relevant arrangements” on 5 April 2016,
- their “relevant amount” on 5 April 2016 is more than £1,073,100,
- they do not have primary protection (whether active or dormant), and
- they do not have individual protection 2014.
However, where as a result of a subsequent pension debit the value of a person’s pension rights falls below the amount entitling them to primary protection or individual protection 2014 they can subsequently apply for IP16 providing their relevant amount exceeded £1,073,100 on 5 April 2016.
The conditions do not prevent a member from applying for IP 2016 where they already have any of
- enhanced protection,
- fixed protection,
- fixed protection 2014,
- fixed protection 2016.
If the member already has one of the protections referred to above and their IP16 application is successful it will operate on the “dormant basis” for so long as the other protection remains valid. The dormant basis applies because the other protections all protect a higher amount of allowances than IP16 so IP16 is not required while the other protection remains valid.
Once an individual has IP 2016 there are no restrictions on what they are able to do with their future pension savings. However, the amount of any lump sums or death benefits in excess of the individual’s allowances will be subject to income tax at the recipient’s marginal rate.
"Relevant arrangement" and "relevant amount"
Paragraph 9(3) and 9(4) Schedule 4 Finance Act 2016
A member has one or more relevant arrangements if on 5 April 2016:
- they are a member of one or more registered pension schemes, and/or
- they are a “relieved member” of a “relieved non-UK pension scheme” (see PTM113410).
The relevant amount is the total value on 5 April 2016 of the member’s pension rights in all their relevant arrangements. An individual can have different types of pension rights and for IP16 these have been categorised as Amounts A, B, C and D.
Applications for IP16 must be made online
Paragraph 14(3)(b) and (c) Schedule 4 Finance Act 2016
Applications for FP 2016 must be made online on or after 6 April 2016 until before 6 April 2025.
Who can make an application for IP16
Paragraph 14(3)(a) Schedule 4 Finance Act 2016
An application can be made by either the member themselves or some other person on their behalf.
Conditions required for a valid application for IP16
Paragraph 14(3) Schedule 4 Finance Act 2016
An application for IP16 should be made online on or after 6 April 2016 until before 6 April 2025. For the online application to be valid, certain conditions have to be met. These conditions are that the application must:
- be made by or on behalf of the individual concerned,
- be made on or after 6 April 2016,
- be made before 6 April 2025,
- be made online in a format authorised by HMRC,
- contain the individual’s title, full name, full postal address and email address and, where the individual is not the applicant, contain the same details for the applicant as well,
- give the individual’s date of birth,
- give the individual’s National Insurance number (or if they do not have a National Insurance number, the reasons for this),
- give the value of their pension savings broken down into Amounts A, B, C and D as appropriate,
- the individual’s relevant amount,
- give the transfer date of any pension debit to which their pension savings have become subject since 6 April 2016 and before the application is made, and the amount of the discounted pension debit (that is, the amount by which their relevant amount is actually reduced),
- contain a declaration that the member doesn’t have primary protection,
- contain a declaration that the member doesn’t have individual protection 2014,
- contain a declaration that everything stated in the application is true and complete to the best of the applicant’s knowledge and belief.
Will HMRC accept all applications for IP16?
Paragraph 14(2) and (3) Schedule 4 Finance Act 2016
As long as the member completes the prescribed form before 6 April 2025, giving all the information that is requested then the application is a valid application which will be accepted by HMRC. Where HMRC refuse to accept an application, the member has a right to appeal against that decision.
Dormant applications for IP16
Paragraph 14(4) and (7) Schedule 4 Finance Act 2016
A member can apply for IP16 where they already have any of enhanced protection, fixed protection, fixed protection 2014 or fixed protection 2016 (collectively the “prior protection”). Where this happens, if the IP16 application is successful it will operate on the dormant basis for so long as the prior protection remains valid.
An IP16 application is dormant where HMRC is satisfied that the application would have been accepted but for the existence of the prior protection. HMRC will not issue the individual with a reference number unless and until such time as the individual loses their prior protection.
Where HMRC decides that an IP16 application should be accepted on a dormant basis, they must notify the applicant of their decision.
If the prior protection no longer applies, the member must inform HMRC, so HMRC can issue them with a reference number for their IP16.
When HMRC may withdraw an IP16 reference number
Paragraph 15 Schedule 4 Finance Act 2016
HMRC may withdraw a reference number that they have issued to a member if:
- something contained in the member’s application was incorrect,
- the member has subsequently successfully applied for any individual protection 2014 or fixed protection 2016,
- the member has any of enhanced protection, fixed protection, fixed protection 2014, individual protection 2014 or fixed protection 2016,
- IP 2016 ceases to apply because the member’s relevant amount has been reduced below £1,073,100 as a result of the member having become subject to a pension debit,
- the member has failed to respond within the given deadline to a notice given by HMRC under paragraph 1 of Schedule 36 to Finance Act 2008 relating to the member and IP 2016.
If HMRC withdraws a member’s IP16 they must notify the member to tell them that they have done so and give their reasons for the withdrawal. The member may appeal against the withdrawal of their reference number.
Appeal against HMRC's refusal to issue or decision to withdraw an IP16 reference number
Paragraph 16 Schedule 4 Finance Act 2016
Where HMRC has refused to accept a member’s application for IP16, they must notify the member that their application has been unsuccessful. The member may appeal against this decision to the First-tier or Upper Tribunal as appropriate. The member may similarly appeal against HMRC’s decision to withdraw their reference number.
Where the appeal is considered by the tribunal and relates to the refusal to issue a reference number, the tribunal will allow the appeal if the tribunal is satisfied that:
- the application was a valid application,
- everything in the application was correct, and
- at the time of deciding the appeal none of the situations 2 to 5 listed in the section “When HMRC may withdraw an IP 2016 reference number” apply.
If the above grounds are not satisfied the tribunal must dismiss the appeal.
If the tribunal finds that HMRC should have accepted the notice, then HMRC must issue the member with an IP16 reference number.
Where the appeal is considered by the tribunal and relates to the withdrawal of a reference number, the tribunal will allow the appeal if the tribunal is satisfied that the withdrawal was not authorised on the grounds set out at “When HMRC may withdraw an IP 2016 reference number”.
Notifying subsequent pension debits
Paragraph 18 Schedule 4 Finance Act 2016
An individual must notify HMRC if they receive a discharge notice related to a pension debit - i.e. a notice of discharge of liability in relation to a pension credit corresponding to the pension debit issued under regulation 8(2) or (3) of the Pensions on Divorce etc. (Provision of Information) Regulations 2000 (SI 2000/1048) - at a time when any of the following circumstances apply:
- the individual has been issued with a reference number following a successful application for IP16,
- the individual has a pending application for an IP16 reference number. A pending application is one where the individual has (a) made an application but does not yet know if it has been successful (i.e. they have not been issued with a reference number) or (b) has not been told their application has been successful on a dormant basis or (c) the application has been unsuccessful but an appeal is in progress against HMRC’s refusal to issue a reference number (an appeal, including a further appeal, is in progress for so long as it has not been either withdrawn or determined and there is no prospect of further appeal), or
- an appeal is in progress against HMRC’s decision to withdraw the individual’s IP16 reference number.
Where any of the above circumstances apply, the individual must notify HMRC of both the “appropriate amount” of the pension debit and the “transfer day” as defined by section 29 Welfare Reform and Pensions Act 1999 or Article 26 of Welfare Reform and Pensions (Northern Ireland) Order 1999 (SI 1999/3147 (NI 11)).
The notice must be given to HMRC within 60 days of the date of the discharge notice related to the pension debit. Notice must be given either using the online facility provided by HMRC for this purpose or by any other means authorised by HMRC in a particular case.
The individual may be liable to penalties if they do not notify HMRC within 60 days.
What happens if the member dies before they have made an application for IP16?
Paragraph 19 Schedule 4 Finance Act 2016
Where the member dies before making an application for IP16, their personal representatives (PRs) can do anything in relation to applying for IP16 that the member could have done.
So, the above guidance applies to PRs in such circumstances. Where the application is being made by the member’s PRs there is a further condition for a valid application namely that the application must contain the individual’s date of death as well as their date of birth.
If, after the individual’s death, HMRC decides to withdraw a reference number issued to the individual they must give the individual’s PRs the notice of, and reasons for, the withdrawal.