Pension concession for higher earners Pension savers with "enhanced protection" on their accumulated funds can now apply to shield their benefits against steep tax charges ahead of the reduction in the lifetime allowance. Until this week, savers with "enhanced protection" (EP) - a form of protection first offered in 2006 - were barred from registering for newer transitional arrangements offered to savers affected by the drop in the lifetime allowance (LTA) from £1.5m to £1.25m on April 6 next year. Individual protection 2014 (IP14) will allow savers with funds of between £1.25m and £1.5m to set a personalised allowance with HM Revenue & Customs, based on the size of their benefits on April 5, the day before the rules change. They are then not subject to the lower LTA. Crucially, IP14 is more flexible than previous transitional protections offered by the government when the LTA has fallen, as it allows individuals to keep saving into their pension without losing their protection and triggering a fall back to the current, lower LTA. Individuals face tax charges of 55 per cent on benefits which breach the lifetime allowance. Pension experts argued it was unfair for those with enhanced protection to be excluded from the more flexible 2014 arrangement, as it could offer an extra buffer if they inadvertently broke their conditions. There were growing concerns that savers were at risk of losing their enhanced protection if they were automatically enrolled into a workplace pension, for example, or built up benefits above a set limit at any point before they retired. However, the government has now reversed its policy, after responses to a consultation suggested that IP14 would be a useful fallback for individuals if EP was lost. "This is a good outcome for those individuals, especially those with final-salary benefits where the relevant accrual test that determines continued eligibility for enhanced protection may not be carried out for some years into the future until those benefits are crystallised," said Adrian Walker, pension expert with Skandia, the pension provider. Registering for individual protection for those with significant historical savings could give them an underpin of between £1.25m and £1.5m before a lifetime allowance tax charge could be applied. The government also confirmed this week that individuals who have lost enhanced protection since 2006 would be eligible to apply for IP14, providing they did not have "primary protection" on April 6 2014. Meanwhile, savers with pots above £1.25m can still apply for "fixed protection 2014" which will allow them to lock into the current LTA of £1.5m. However, a condition of this new protection is that they must discontinue active pension saving and limit benefit accrual. "Someone who is likely to exceed the new LTA needs to get advice and get it early on these protections which are being offered," said David Downie, technical expert at Standard Life, the pension provider. There are different deadlines for each type of protection, and rules about how each works, so it is best to seek advice if you want to avoid a tax charge on funds exceeding the new lower LTA after April 6. To apply for individual protection 2014, visit hmrc.gov.uk/pensionschemes/fp14online.htm.