Transitional protection will be available for those who think they are likely to be caught by the life time allownace and might otherwise be liable to a tax charge.
Two forms of protection will be available: Fixed Protection 2016 and Individual Protection 2016. They are modelled on the protections introduced when the lifetime allowance was reduced from £1.5m to £1.25m in 2014, and the same conditions and restrictions generally apply to them. Applications can be made online from July 2016.
Fixed Protection 2016 (FP16) will work in the same way as both of the previous versions of fixed protection. It will give an individual who applies for it a protected lifetime allowance of £1.25m, reverting to the standard lifetime allowance if it is increased to above £1.25m at any point in the future.
Individual Protection 2016 (IP16) is a bit more straightforward than for FP16, but the way it operates is a bit more complicated.
In order to apply for IP16 an individual needs to have pension savings worth in excess of £1m on 6 April 2016 made up of their savings in registered pension schemes as well as any savings accrued in a “relieved non-UK pension scheme” (provided they are a “relieved member” of the scheme).
They cannot have primary protection, but they can have any of the other existing types of lifetime allowance protection
IP16 will give those who successfully apply for it a personal lifetime allowance equal to the value of their pension savings on 6 April 2016, subject to a cap of £1.25m. As with FP16, if the standard lifetime allowance increases in future beyond £1.25m IP16 will cease to have effect.