Don’t miss the deadline for IP2016
27 January 2020
As the deadline for Individual Protection 2016 applications approaches, are your clients ready? The Prudential Technical Team look at how it works and why it’s a a vital part of pensions planning.
There is no closing date for IP16 applications I hear you say, and I’d agree with you except I feel it’s important to mention the statutory obligation on scheme administrators to provide values at 5 April 2016 only applies for 4 years so, if you need pension values from your scheme, be sure to request these before 6 April 2020.
The law* states a member can ask a scheme administrator for help in calculating their relevant amount to enable the member to make an application for individual protection 2016. The scheme administrator must provide the information if:
If all the conditions apply the scheme administrator must give the information to the member within three months of receiving the member’s written request for information.
When you consider an individual may have been in a defined benefit scheme on 5 April 2016 but has subsequently transferred to a defined contribution scheme, it makes sense the DB scheme can only be left on the hook for providing retrospective values for a limited period.
A member with pension savings over £1 million on 5 April 2016 and providing they do not already hold primary protection or IP14 is eligible to apply. They can protect the lower of (1) the value of existing pension savings at 5 April 2016 and (2) £1.25m.
The personalised LTA is fixed, it is not uprated with CPI which only increases the standard LTA limit.
Contributions and benefit accrual can continue but any benefits in excess of the personalised LTA at a benefit crystallisation event will be subject to LTA charges in the normal way.
All based on the scheme(s) the member was in on 5 April 2016 and there are potentially four values needed;
The total of all amounts is the ‘relevant amount’. Where this is greater than £1.25m, the protection is capped at £1.25m. Where the relevant amount is between £1 million and £1.25m, it becomes the personalised protection amount. Where it is less than £1 million, IP16 is not available.
Losing IP16 (cont over page)