Primary Protection

Primary protection was introduced by Finance Act 2004, for people with total benefits valued at £1.5m (the newly introduced lifetime allowance) or more on 5 April 2006, to reduce potential tax charges.  Though the LTA was abolished from 6th April 2024 it still has an impact on benefits payable.

What is Primary Protection?

Primary protection was introduced by Finance Act 2004 to protect anyone who would exceed the newly introduced lifetime allowance from the full extent of lifetime allowance excess tax charges. This form of protection was available to anyone whose total benefits (crystallised and uncrystallised) from registered pension schemes on 5 April 2006 were valued as £1.5m or more (the lifetime allowance at 6 April 2006).

It was aimed at individuals:

• who wanted to continue in pensionable employment or accrue benefits in a registered pension scheme after 6 April 2006, and
  
  
• were already over the LTA and likely to be so when they took their benefits.

Those with Primary Protection got an enhancement factor which increased their LTA.

For example, if someone had rights of £2.25m on 5th April 2006 they got an factor of 0.5 (£2.25m / £1.5m). This then applied to their LTA, but when the LTA dropped below £1.8m the protection applied the factor to £1.8m until such times as the LTA went over £1.8m again (which hasn't happened).

It was also possible to have primary protection over tax-free cash where the value of lump sum rights at the 5th April 2006 were over £375,000.

The protections and their principles carry over into the new regime with the new LSA and LSDBA.

Those who had applied for enhanced protection could also apply for primary protection if eligible. Where this applies, the primary protection is dormant and doesn’t apply to the individual unless and until the enhanced protection is lost or revoked. Holders of Primary Protection were not eligible to apply for the Fixed or Individual Protections. 

From 6th April 2026 those with Primary Protection have the new LSA and LSDBA enhanced. The usage of the new allowances remains broadly the same as before LTA abolition.

Primary Protection holders can apply for a Transitional Tax Free Amount Certificate.

Primary Protection and the Lump Sum Allowance (LSA).

Primary Protection impacts the LSA available to an individual. The impact is different depending on whether there is also protection of lump sum rights. 

No protection of lump sum rights

The LSA for the individual is £375,000.   The calculation of tax free amounts available when a lump sum is paid work in the same manner as someone without protection.  

The standard transitional rules apply to take account of benefits paid before 6th April 2024.  

Lump sum rights protected

The standard transitional rules apply to take account of benefits paid before 6th April 2024. 

The maximum tax free amount payable from any arrangement is: 

A-B

• A is the amount shown on the protection certificate i.e the value of the individual’s relevant uncrystallised lump sum rights on 5 April 2006, multiplied by 1.2.
• B is the total value of previous PCLS paid. Those paid before 6th April 2012 are revalued by multiplying by 1.2 and all others use the amount paid.  

There are special rules where the full value of the arrangement is being paid tax free - see our Standalone Lump Sum page.

Primary Protection and the Lump Sum and Death Benefit Allowance (LSDBA).

Primary Protection impacts the LSDBA available to an individual. The impact is the same whether or not there is also protection of lump sum rights.

The LSDBA is subject to the standard transitional deduction.  

The LSDBA is £1,800,000 multiplied by the Primary Protection Factor. 

In the example above the initial LSDBA would be £1.8m + (£1.8m x 0.5) = £2,700,000.   

Losing primary protection

Unlike enhanced protection, primary protection can’t be revoked. The only time primary protection may be lost is in the event of a pension debit.

if a pension debit is applied to the member’s benefits, subsequent to a divorce after 5 April 2006. The individual's LAEF is recalculated to take into account the value of the benefits 'given up'.

The way this is done is to redo the factor calculation  as it would have been had the debited amount not been included in the value at 5 April 2006 (even though this is not at the same date).

Taking the example from above: