RPSM03102040 - Technical Pages: Protecting pre 6/4/06 pension rights from tax charges: Primary protection: Reduction on divorce

Reduction of the primary protection factor on divorce

[Para 11 Sch 36] [Regs 17 & 18 The Registered Pension Schemes (Enhanced Lifetime Allowance) Regulations 2006 - SI 2006/131] 

Primary protection cannot be given up. There is only one situation where an individual may have their primary protection reduced or lose it. This is if after 5 April 2006 the individual becomes subject to a pension debit as a result of a pension sharing order following their divorce.

When an individual with primary protection becomes subject to a pension debit their primary protection factor will be reduced. This is done by reducing the amount ‘RR’ (the value of the pension rights on 5 April 2006) in the formula (RR - SLA)/SLA by the amount of the pension debit.

Where the pension debit result in ‘RR’ being less than £1.5 million the individual will have lost primary protection.

RPSM03103000 gives more information on the operation of pension debits.

When an individual has become subject to a pension debit they must notify HMRC. If primary protection has not been lost due to the pension debit HMRC will issue a new certificate.