FAQs

Where payment of a pension benefit starts after 6 April 2006, the combined value of all your pension and lump sum entitlements from all UK registered pension arrangements you belong to must be compared against the LTA set for the year you draw your benefits.

If the total ‘value’ of all your pension benefits exceeds the LTA (or your remaining LTA if you have previously drawn some of your benefits), tax is charged by HM Revenue and Customs on the excess, known as the Lifetime Allowance Charge.

Protection from the Lifetime Allowance Charge
Four types of protection exist, Primary Protection, Enhanced Protection, Fixed Protection (2012, 2014 and 2016), and Individual Protection (2014 and 2016). These allowed individuals with high-value benefits to protect the value of pension benefits built up when the LTA was first introduced and subsequently reduced in later years.

This is a complex area and we strongly recommend that you seek independent financial advice if you have any questions about how the Discretionary Increases could impact your LTA Protection. The default position is that members with a pension in payment are automatically opted-in to receive the increases.

Enhanced Protection provided protection from tax charges in April 2006 for those either receiving or expecting to receive substantial pension benefits in retirement. Members must have registered with HMRC by 5 April 2009 for the protection to apply.

If you are a pensioner with Enhanced Protection, the Trustee’s understanding is that the Discretionary Increases will not trigger a test (BCE3 ) of whether Enhanced Protection has been lost or not, because the Discretionary Increases should not cause increases overall to exceed the “permitted margin” (i.e. the pension will not increase by more than the greater of 5% per annum or the increase in RPI since the pension started). Therefore Enhanced Protection would not be lost if Discretionary Increases are paid and no test needs to be undertaken.

Deferred members of APS who have Enhanced Protection and who have not drawn all of their main pension from APS would also need to think about whether “relevant benefit accrual” will occur when they draw their main APS pension and this triggers a test (called a Benefit Crystallisation Event, or BCE ² ) of whether Enhanced Protection has been lost or not. Deferred members would need to think about what increases are provided from other defined benefit pension schemes which are connected with their BA employment (if any). However, this consideration is not relevant for those who have already put all of their main APS defined benefit pension into payment.

If you are an APS pensioner with Enhanced Protection and you have Additional Voluntary Contributions (AVCs) in APS which have not yet been drawn (but you are drawing all your main APS pension) then, seeing as the Discretionary Increases do not trigger a test (BCE3) of whether Enhanced Protection has been lost or not, the Trustee’s view is that Enhanced Protection will not be lost and will still be available when you come to draw your AVCs.

It is the Trustee’s understanding that for pensioners with Enhanced Protection, any benefits you may have in other pension arrangements (whether connected with your employment with BA or not) and whether you have drawn these already or not, is not relevant to the assessment of whether a test (BCE3) is triggered by reason of the Discretionary Increases in APS. Therefore, as Enhanced Protection has not been lost then you will still have Enhanced Protection when you put any other pension benefits into payment.

¹ Pension benefits built up in UK-registered pension schemes are tested against the Lifetime Allowance when you draw them. The occasions when this test is carried out are called benefit crystallisation events (BCE). For more details visit: www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm088100

² www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm093700

Fixed Protection is a form of LTA Protection. Members must have registered with HMRC by 6 April 2012 for Fixed Protection 2012 (FP12) to apply; by 6 April 2014 for Fixed Protection 2014 (FP14) to apply; or anytime from 5 April 2016 for Fixed Protection 2016 (FP16) to apply. FP12 provides members with a personal LTA of £1.8m; FP14 provides a personal LTA of £1.5m; FP16 provides members with a personal LTA of £1.25m. Fixed protection can be lost if certain conditions are broken.

If you are a pensioner with Fixed Protection, the Trustee’s understanding is that the Discretionary Increases will not cause “benefit accrual” to occur if your main APS benefits have already come into payment. The Trustee’s understanding is therefore that Fixed Protection will not be lost if Discretionary Increases are paid. The HMRC guidance is clear that there is no “benefit accrual” in respect of a particular benefit if that benefit has already come into payment.

Please note that “benefit accrual” would, in the Trustee’s view, occur if Discretionary Increases are paid in respect of any member whose main APS pension – or a portion of it – is still deferred and is not yet in payment (because the Discretionary Increases are increases above the Consumer Prices Index). Such members would lose their Fixed Protection. Only members who have not drawn all of their main benefits from APS need to be concerned about this.

If you are an APS pensioner with Fixed Protection and you have Additional Voluntary Contributions (AVCs) in APS which you have not yet drawn (but you are drawing all your main APS pension) then, as no “benefit accrual” occurs to invalidate Fixed Protection in respect of the main APS pension if Discretionary Increases are paid, the Trustee’s view is that Fixed Protection will not be lost and will still be available when you come to draw your AVCs.

It is the Trustee’s understanding that for pensioners with Fixed Protection, any benefits you may have in other pension arrangements (whether connected with your employment with BA or not) and whether or not you have drawn these already, is not relevant to the assessment of whether “benefit accrual” occurs by reason of the Discretionary Increases applied in APS. Therefore, as Fixed Protection has not been lost, you will still have Fixed Protection when you put any other pension benefits into payment.

You will only have Enhanced or Fixed Protection if you applied for, and were granted this by HMRC. HMRC will have provided you with a certificate or a confirmation number that either Protection had been granted.

Generally, only individuals who had built up substantial pension benefits of at least £40,000 a year are likely to be affected.

This is a form of LTA Protection. It was available for members whose pension benefits value exceeded £1.5m on 6 April 2006. Members needed to register with HMRC by 5 April 2009 for this form of protection to apply. Members who registered for Primary Protection are entitled to a personal Lifetime Allowance (PLTA) which is greater than the standard LTA.

If you are a pensioner with Primary Protection, the Trustee’s understanding is that protection would not be lost by the application of Discretionary Increases. Primary Protection can only be lost or reduced where a member becomes subject to a pension debit as a result of a pension sharing order following a member’s divorce. Therefore Primary Protection would not be lost if Discretionary Increases are paid.

If you are a pensioner with Primary Protection and you have Additional Voluntary Contributions (AVCs) in APS which have not yet been drawn (but you are drawing all your main APS pension) then the Trustee’s view is that Primary Protection will not be lost and will still be available when you come to draw your AVCs.

This is a form of LTA Protection. Members must have registered with HMRC before 6 April 2017 for Individual Protection 2014 to apply. Members who expected their benefits at retirement to be more than £1.25m could apply for the value of their pension benefits on 5 April 2014 to be protected up to a maximum value of £1.5m (IP2014). From April 2016, individuals who expected their benefits at retirement to be more than £1m can apply to protect the value of their pension benefits on 5 April 2016 up to £1.25m (IP 2016).

If you are a pensioner with Individual Protection then the Trustee’s understanding is that protection would not be lost by the application of Discretionary Increases. Individual Protection can only be lost or reduced where a member becomes subject to a pension debit as a result of a pension sharing order following the member’s divorce. Therefore Primary Protection would not be lost if Discretionary Increases are paid.

You can choose to opt-in for future Discretionary Increases (but they cannot be paid retrospectively in respect of previous years). We will automatically check whether you wish to remain opted out when you decide to draw your deferred pension.

You can opt-in for future Discretionary Increases at any time by writing to us.

You can opt-out of receiving future Discretionary Increases at any time by writing to us.