Glossary

This applies to you if you reached State Pension age on or before 5 April 2016.

In addition to the basic State Pension you may have also built up an additional State Pension. Like the basic State Pension this is also based on your National Insurance contributions, but also takes into account your earnings and whether you claimed benefits. 

You will not have built up an additional State Pension while a member of a contracted-out pension arrangement.

This applies to you if you reached State Pension age on or before 5 April 2016.

The full basic State Pension for 2023/24 is £156.20 per week and for 2024/25 is £169.50 for people who have all the qualifying years of National Insurance contributions. If you do not have all the qualifying years of National Insurance contributions, you will be paid a proportion of the full amount based on the number of years of National Insurance contributions that you do have. 

The CPI is an inflation measure based on the change in the prices of a representative basket of goods and services over time.

Individuals who had certain rights on 5 April 2006 could apply to HMRC to protect them for protection from the lifetime allowance charge when those rights come into payment (crystallise) after 5 April 2006.

Individuals could claim enhanced protection regardless of their value of their pension rights at 5 April 2006. Individuals that had valid enhanced protection were not liable to the lifetime allowance charge on any benefit crystallisation event and could not take a lifetime allowance excess lump sum. An individual could protect their pension rights plus any separate lump sum rights.

This fixes your lifetime allowance at £1.25 million.

If HMRC received your application on or after 15 March 2023, you cannot keep building up your pensions from 6 April 2016, except in limited circumstances. It does remain possible to make a claim for Fixed Protection 2016 until 5 April 2025, providing no further contributions have been made into your pension from 6 April 2016.

If HMRC received your successful application before 15 March 2023 and you still validly hold this protection, you can continue to build up your pensions without impacting the validity of your Fixed Protection 2016 from 6 April 2023. The rules on how you can lose your protection still applied from 6 April 2016 to 5 April 2023.

The lifetime allowance was an overall limit on the value of your pension benefits from all registered pension schemes – and any overseas pension schemes that have benefitted from UK tax relief – before a 55% tax charge would apply, if taken as a lump sum (or 25% on the purchase of a lifetime annuity where annuity income was subject to tax). This was known as the ‘lifetime allowance charge’. The lifetime allowance charge was removed with effect from 6 April 2023. Lump sums that would previously have had a 55% tax charge applied are instead taxed as pension income of the recipient in 2023/24.

This protects your lifetime allowance to the lower of:

• The value of your pension savings at 5 April 2016
• £1.25 million

You can continue building up your pension savings but you would have had to pay a tax charge on money taken from your pension savings that exceed your protected lifetime allowance if you took your pension before 6 April 2023.

It remains possible to make a claim for Individual Protection 2016 until 5 April 2025.

The LTA used to be the overall limit on the value of your pension benefits from all sources (except the State Pension and any benefits you are receiving as a dependant) before a tax charge was applied. The LTA was abolished with effect from 6 April 2024.

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An event before 6 April 2024 defined by HMRC as a “benefit crystallisation event,” that required your benefits to be tested against the lifetime allowance.

When the LTA was introduced and later when changes were made, individuals were given the opportunity to apply for protection against the LTA so that they would reduce or eliminate the effect of the lifetime allowance charge when they take their benefits.

There are four types of protection against the LTA: Primary Protection, Enhanced Protection, Fixed Protection (2012, 2014 and 2016), and Individual Protection (2014 and 2016). If you have applied for any protection, please ensure that we are made aware of this as it may affect your benefits.

An insurance policy which provides you with a guaranteed income for the rest of your life.

A single payment made at a particular time, rather than a series of smaller payments.

The LSA was set at £268,275 as a standard (25% of the 2023/2024 LTA) with effect from 6 April 2024. It restricts the amount of lump sum that can be received tax-free when you first take your pension benefits.

The LSDBA was set at £1,073,100 as a standard (the 2023/24 LTA) with effect from 6 April 2024. It applies to the tax-free element of all lump sum benefits received from pension arrangements. Each time you become entitled to one of these lump sums (or a person is paid one of these lump sum benefits in the event of your death), this allowance is reduced.

The rate of tax on the next £1 of income. In the UK as elsewhere, the more you earn, the more tax you pay.

The new State Pension is a regular payment from the government that most people can claim in later life. You can claim the new State Pension when you reach State Pension age if you have at least 10 years of National Insurance contributions and are:

The new State Pension for 2023/24 is £203.85 per week and for 2024/25 is £221.20.

The OTA is currently set at £1,073,100 and is the amount that can be transferred to a QROPS without incurring a tax charge provided specific conditions are met.

The sums of money you get from your pension arrangements plus any sums of money your dependants receive on your death.

The amount of lump sum that can be paid tax-free to a policyholder when they take certain pension benefits.

Your personal allowance is the amount of income you do not have to pay tax on. The standard personal allowance is £12,570 for the 2023/24 and 2024/25 tax years.

Your personal allowance may be bigger if your spouse or civil partner claimed marriage allowance or you are entitled to blind person’s allowance. It is smaller if your income is over £100,000 or if you claimed marriage allowance in favour of your spouse or civil partner.

A pension scheme established outside the UK that is broadly similar to a UK registered pension scheme. The scheme would have confirmed to HMRC that it meets the conditions that the HMRC has set out and undertakes to provide information to HMRC.

A registered pension scheme is a pension scheme that is registered under Chapter 2 of Part 4 of the Finance Act 2004 because either:

• An application to be registered has been made and the scheme has been registered by HMRC
  
  or
• The scheme is treated as automatically registered

The main benefit of a pension scheme being registered is the availability of certain tax reliefs and exemptions.

Your Rothesay policy is regarded as a registered pension scheme.

The tax year runs from 6 April in one year to 5 April in the following year. For example the 2024/25 tax year is the period 6 April 2024 to 5 April 2025.

A document issued to an individual confirming the individual’s revised lump sum allowance (LSA) and lump sum and death benefit allowance (LSDBA). A TTFAC can only be issued before certain lump sum benefits are taken post 6 April 2024.

Under HMRC rules, if the value of your pension benefits at 5 April 2006 was more than the 2006/2007 lifetime allowance of £1.5 million and you have registered for primary protection, you have an individual lifetime allowance based on how much your benefits at 5 April 2006 exceeded the value of the 2006/2007 standard lifetime allowance. Your individual lifetime allowance increases at the same rate as the standard lifetime allowance.

Before 6 April 2006, some individuals had the right to be paid a tax- free lump sum of more than 25% of their total under a pension scheme. Scheme-specific lump sum protection is the name given to the form protection that allows such individuals to be paid a pension commencement lump sum that is more than 25% of the value of their total benefits coming into payment from the registered pension scheme.