Glossary · UK
What is Individual Protection (Lifetime Allowance)?
A form of pension protection that fixes an individual's tax-free lump sum entitlement based on the actual value of their pension savings at the time a Lifetime Allowance cut took effect, without requiring contributions to stop.
Full Definition
Individual Protection is a category of pension protection, available alongside Fixed Protection whenever the Lifetime Allowance was reduced (most recently in 2014 and 2016), that lets a person lock in a personal Lump Sum Allowance and Lump Sum and Death Benefit Allowance based on the actual value of their pension savings on the date the allowance was cut, up to a capped maximum, rather than simply reverting to the new lower standard allowance. Unlike Fixed Protection, Individual Protection does not require the individual to stop making pension contributions or stop building up further defined benefit accrual -- they can carry on saving into their pension -- but doing so simply uses up more of their own protected allowance rather than increasing it further, and any Annual Allowance tax charges on ongoing contributions still apply as normal. To qualify, the individual's total pension savings generally needed to exceed the then-current Lifetime Allowance (GBP 1.25 million for Individual Protection 2014, GBP 1 million for Individual Protection 2016) on the relevant date, and protection had to be applied for, historically via HMRC's online service, with evidence of the pension valuation retained in case of a future compliance check. Since the Lifetime Allowance was abolished from April 2024, Individual Protection now functions purely as a mechanism for calculating an individual's enhanced Lump Sum Allowance and Lump Sum and Death Benefit Allowance rather than as a Lifetime Allowance charge shield.