You can save as much as you like towards your pension, but there is a limit on the amount of tax relief you can obtain. The lifetime allowance is the maximum amount of pension savings you can build without incurring additional tax charges.
Changes to the Standard Lifetime Allowance (LTA)
The Standard Lifetime Allowance (LTA) is reducing from £1.5m to £1.25m with effect from 6th April 2014.
A standard LTA of £1.25m will apply to members who claim their benefits on or after 6th April 2014, meaning that more scheme members will become subject to LTA charges or see those charges increase.
Members who wish to have their benefits assessed against the current LTA of £1.5m should consider applying for Fixed Protection 2014 and opting out of the NHS Pension Scheme. In order to ensure benefits are assessed against the current LTA of £1.5m the last day of membership must be 4th April 2014 or earlier.
Alternatively, if you are planning to retire, as long as you claim your NHS Pension Benefits prior to 5th April 2014, the value will be tested against the current £1.5m limit. However, NHS Pensions generally require at least 3 months to process a pension benefit claim.
Members will be able to apply to HM Revenue & Customs (HMRC) for Fixed Protection 2014 from August 2013; applications are available on the HMRC website. Members will not require a valuation from NHS Pensions in order to apply for Fixed Protection 2014.
Fixed Protection 2014 means that you can take pension savings worth up to £1.5m without paying the lifetime allowance charge; however certain criteria must be adhered to. You cannot have Fixed Protection 2014 if you already have primary, enhanced or a previous fixed protection.
It is important to understand all of the benefits of the pension scheme and for many members it is likely that continued membership would be the most suitable option irrelevant of the changes to the Lifetime allowance, however we would recommend that you take independent financial advice prior to making any changes to your membership of the NHS Pension Scheme.
If you have any concerns regarding these issues, or you would like further information, please contact a member of our medical services team or your usual BHP contact.
