A recently-published court ruling could open HMRC up to new claims from investors who accidentally lose lifetime allowance ‘protection’ by forgetting to stop paying contributions to their schemes.
The case centred on the appellant’s claim he had accidentally failed to cancel a direct debit to his pension scheme which, HMRC argued, should void his £1.8m lifetime allowance ‘fixed protection’.

Fixed protection 2012 was introduced following the cut in the lifetime allowance from £1.8m to £1.5m announced in the March 2011 Budget.

The measure was designed to ensure people who risked going over the new, lower allowance – having saved in a pension assuming the figure would be £1.8m – were not unfairly penalised.



Those who applied for fixed protection 2012 could continue to benefit from a £1.8m lifetime allowance but were not allowed to make any further pension contributions.

Doing so would void the protection and potentially open the member up to a six-figure tax bill.

There are various other protections in place which can be lost if contributions are paid into a pension, including enhanced protection, and three different levels of fixed protection.

Until now the extent to which ‘genuine error rules’ could apply where savers mistakenly break these rules has not been explored.

While HMRC argued the appellant’s failure to cancel his standing order should render his fixed protection certificate worthless, the Judge ruled the accidental nature of the breach meant the protection remained valid.

Tom Selby, senior analyst at AJ Bell, said: “This ruling potentially drives a coach and horses through HMRC’s hardline application of the lifetime allowance rules.

“It is refreshing to see the judge take a pragmatic approach in this case, particularly given the sheer complexity of the pension system UK savers are forced to navigate.

“It seems perfectly reasonable in the case of a genuine mistake such as this that the intention of the individual should be the main consideration, rather than blindly following the rules.

“Whether this forces HMRC to rethink its aggressive approach remains to be seen, however.”