Primary protection

When the lifetime allowance was introduced back in 2006, primary protection was one of two forms of protection available to shelter pensions savings from the newly-introduced lifetime allowance charge.

As part of our Bitesize Technical series, Senior Technical Consultant Lisa Webster looks at how this protection works under the new post-lifetime allowance regime.

Key insights on pension protection

Why was primary protection introduced?

Primary protection was introduced to protect pension savings built up before 2006 from the newly-introduced lifetime allowance charge.

What conditions needed to be met?

To be eligible to apply for primary protection, total pension savings at 5 April 2006 must have been valued at more than £1.5 million, and the application made before 5 April 2009.

What was the benefit of holding primary protection?

When primary protection was granted, an enhancement factor was stated on the protection certificate. This was based on the excess fund value above £1.5 million at 5 April 2006. When benefits were tested, it would be against this enhanced allowance.

Could lump sum protection be held with primary protection?

It was possible to hold primary protection with or without a protected lump sum. Where there was no protected lump sum specified on the certificate, the standard maximum pension commencement lump sum was £375,000. Where the lump sum was protected, an amount would be specified.

What does holding primary protection mean now that the lifetime allowance has been abolished?

Primary protection holders will have a protected lump sum and death benefit allowance of £1.8 million multiplied by their enhancement factor.

If no lump sum protection is held, then the lump sum allowance for someone with primary protection is £375,000.

If the protection includes lump sum protection, it will be stated as a figure on their certificate. When they come to access benefits under the new regime, this figure will be increased by 20% to give their protected tax-free cash entitlement.

More Bitesize Technical

Want to snack on another technical insight? Start from the beginning of our latest series on death benefits, here.

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