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Reduction In Lifetime Allowance: What Action Is Needed

• From April 2012, the total amount you can save into a pension over your lifetime will fall from £1.8m to £1.5m.
• GP whose pension exceeds the limit of £1.5m will have to pay a tax penalty of 55% on their lump sum and 25% on their pension income – in addition to income tax at their usual rate.

• If your pension exceeds the lifetime allowance, you can apply for “fixed protection”. Anyone whose pension is already above the previous £1.8m limit – or is likely to exceed it in future – should have applied for protection already. However, those whose pensions are between £1.5m and £1.8m – or are likely to exceed £1.5m in future – need to apply for protection before 5th April 2012.

• If GP’s apply for fixed protection they must opt out of the NHS Pension Scheme. In order to qualify, no payment must be made into any pension schemes including the NHS Pension Scheme after 6th April 2012.

• To work out if you will exceed the lifetime allowance, each £1 of income in retirement is deemed by the Revenue to be worth £23 – so if your pension income is due to be £65,000, the value of your pension fund is deemed to be just below £1.5m.

• To find out if you will exceed the lifetime allowance you will need to request a pension benefits letter from the NHS Pensions Agency.

• You can apply for fixed protection using form APSS227, available on the Revenue website – http://www.hmrc.gov.uk/pensionschemes/apss227.pdf

• Online applications are not permitted.

• We strongly recommend that you seek independent financial advice before making any decisions about opting out of the NHS Pension Scheme.