Enhanced protection and the lump sum allowance

Enhanced protection dates from the start of the lifetime allowance regime. People who held pension rights on 5 April 2006 could claim it whatever those rights were worth, and while the lifetime allowance lasted they paid no lifetime allowance charge at all (PTM176310). The lifetime allowance went on 6 April 2024, but the protection did not go with it. It now works through the two allowances that replaced it: the lump sum allowance and the lump sum and death benefit allowance. Its sister protections, fixed protection and individual protection, each set a higher pair of allowances. Enhanced protection gives a fixed lump sum allowance and a death benefit allowance pegged to the member's own pot, and it has a separate route for members whose lump sum rights were large in 2006.

The lump sum allowance: £375,000, then the transitional deduction

For a member with enhanced protection but no lump sum protection, HMRC fixes the lump sum allowance at £375,000, against the standard £268,275 (PTM176310). That figure is only the starting point. A member who crystallised benefits before 6 April 2024 has 25% of their lifetime allowance previously-used amount deducted from it. Where a transitional tax-free amount certificate is in force, the certified amount is deducted instead (FA 2024 Sch 9 para 125; PTM174400). HMRC's Fabian and Jill examples at PTM174400 work both routes through. Whether a certificate helps is the question in do I need a TTFAC?

The death benefit allowance: the member's own 5 April 2024 value

The lump sum and death benefit allowance is personal. It equals the value of the member's uncrystallised pension rights on 5 April 2024. Unlike other members with earlier crystallisations, an enhanced protection member has no transitional deduction from it (FA 2024 Sch 9 para 126(1)(c); PTM174400). Because it is the member's own figure, it can be lower than the standard £1,073,100 — for example where most benefits were taken before April 2024 and little was left uncrystallised on that date. Our engine resolves the two allowances as below for an illustrative member whose uncrystallised rights were worth £1,600,000 on 5 April 2024.

Both enhanced protection figures come before any transitional deduction on the lump sum allowance side and before any lump sum paid since 6 April 2024. Enhanced protection also changes how the tax-free cash itself is limited: the lump sum and death benefit allowance no longer caps the permitted maximum of a pension commencement lump sum (FA 2004 Sch 36 para 12A(2)(a)). Serious ill-health lump sums, the tax-free part of an uncrystallised funds pension lump sum and lump sum death benefits are limited instead by what could have been paid from the same arrangement on 5 April 2024 (for death benefits, less what has already been paid tax-free from it since 6 April 2024) (para 12A(3)), and once the member has become entitled to a serious ill-health lump sum under an arrangement, its permitted maximum for a pension commencement lump sum is nil (para 12A(2)(a)).

With lump sum protection

A member whose total lump sum rights were more than £375,000 on 5 April 2006 could register lump sum protection alongside enhanced protection. Their HMRC certificate records the lump sum protection (PTM174400 describes it as a percentage of the benefits coming into payment; PTM176320 as a monetary amount). For them the transitional lump sum allowance deduction does not apply (PTM174400). Each arrangement's tax-free cash is limited to the most it could have paid as a pension commencement lump sum on 5 April 2023, less any such lump sums paid from it since (PTM176320). The certificate and the scheme's records give that figure; there is no general number to print here. A member who meets this lump sum condition cannot take an uncrystallised funds pension lump sum at all (para 12A(2)(b)).

Where total lump sum rights were £375,000 or less, but one scheme gave more than 25% of the member's uncrystallised rights in it as a lump sum, the relevant protection is scheme-specific protected tax-free cash (PTM176320; PTM063130).

What loses enhanced protection

The date the notice was given decides whether it can still be lost. A member who gave HMRC notice of enhanced protection before 15 March 2023 can accrue benefits, transfer or join new arrangements without risk to the protection (FA 2004 Sch 36 para 12(2); PTM176310). Valid late applications can still be made, and for a notice given on or after 15 March 2023 the protection ends if (FA 2004 Sch 36 para 12(2); PTM176340):

• relevant benefit accrual occurs under any arrangement;
• an arrangement receives an impermissible transfer;
• a transfer out is made that is not a permitted transfer;
• a new arrangement is made other than to receive a permitted transfer or as part of a retirement-benefit activities or age-equality compliance exercise; or
• the member tells HMRC they no longer want it.

For that later group, the accrual test for a money purchase arrangement looks at what goes in, so most contributions end the protection. For defined benefits and cash balance arrangements it looks at what comes out. Automatic enrolment into a new scheme ends it too, unless the member opts out within the statutory window each time they are enrolled or re-enrolled; an employer with reasonable grounds to believe the member holds the protection may choose not to enrol them (PTM176340). When it ends, the member reverts to the standard £268,275 and £1,073,100 for later events, less the allowance already used and any transitional deduction for benefits taken before 6 April 2024. Events already taken while it was valid are not revisited, and loss through benefit accrual must be notified to HMRC within 90 days. A member who claimed primary protection as well falls back to primary protection instead (PTM176310).

What our calculators do with it

The lump sum allowance calculator offers fixed and individual protection. It does not calculate any lump sum for a member with enhanced protection, and neither does the full workflow: those payments are worked out outside ParaplanAI, with the 5 April 2023 and 5 April 2024 figures checked with the scheme administrator. The figures above are what our engine's protection resolver returns; they illustrate the ceilings and are not a calculation of any payment.

PTM176310 / PTM176320 / PTM176340 (enhanced protection) · PTM174400 (transitional rules) · PTM171000 / PTM172000

FA 2004 Sch 36 para 12 · FA 2004 Sch 36 para 12A · FA 2024 Sch 9 para 125 · FA 2024 Sch 9 para 126