Fixed protection

Fixed protection was introduced when the lifetime allowance reduced from £1.8 million to £1.5 million in 2012. Further versions became available in 2014 and 2016 following more cuts to the lifetime allowance.

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

Key insights on fixed protection

Why was fixed protection introduced?

When the lifetime allowance was cut from £1.8 million to £1.5 million in 2012, fixed protection was introduced. This meant individuals with pension savings of up to the outgoing lifetime allowance could still access their pension up to the old level without any lifetime allowance tax charge.

What conditions needed to be met?

No minimum fund value was required in order to apply for fixed protection, but pension contributions weren’t allowed on or after 6 April 2012. Fixed protection gave holders a protected lifetime allowance of £1.8 million.

What about the 2014 and 2016 versions?

The 2014 and 2016 versions worked in the same way as the original fixed protection in 2012, but with lower protected amounts to reflect the outgoing lifetime allowance at that time.

Fixed protection 2014 gave a protected lifetime allowance of £1.5 million, and fixed protection 2016 gave holders £1.25 million.

When each protection was introduced, it was not possible to make contributions without losing the protection.

Have the conditions changed now?

Now that the lifetime allowance has been removed, it’s possible for people with any of the fixed protections to contribute without breaking the protection. This has been the case since 6 April 2023, as long as the protection had been applied for before 15 March 2023.

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

The amount of protected lifetime allowance under the old rules now becomes the protected lump sum and death benefit allowance, or ‘LSDBA’.

So, if the original fixed protection is held, the LSDBA under the new rules is £1.8 million. For fixed protection 2014 it is £1.5 million, and for fixed protection 2016 it is £1.25 million.

More importantly, fixed protection gives the holder an increased lump sum allowance of 25% of the value of the protection held.

This means fixed protection 2012 holders have a protected lump sum allowance of £450,000, those with fixed protection 2014 have £375,000 and those with the newest version, fixed protection 2016, have a lump sum allowance of £312,500.