RPSM03304040 - Scheme Administrator Pages: Protecting pension rights from tax charges: Benefit payments - tax-free lump sum over25%: Enhanced or primary protection

What if the member has registered for primary protection or enhanced protection?

If a member has registered with HMRC for enhanced protection and/or primary protection and they had lump sum rights valued over £375,000 on 5 April 2006, this takes priority over 25% lump sum protection.

Before you pay any benefits it is important that you consider whether primary protection or enhanced protection has been given to the member because it may affect the amount of lump sum which can be paid tax-free from the scheme. You should ask the member whether or not they have primary or enhanced protection. The member’s certificate of enhanced or primary protection will show whether or not the member has separate lump sum protection. If the member has primary protection or enhanced protection ask for details of their protected lump sum (if they have one). For individuals with protection of lump sums of over £375,000 with

• primary protection - follow the guidance in RPSM03305051 to RPSM03305054 
• enhanced protection - follow the guidance in RPSM03303050 to RPSM03303061.

If a member registers for enhanced protection after the lump sum has been paid, it is possible that the lump sum will be an unauthorised payment. This will happen where the amount of the allowable lump sum paid under enhanced protection (see RPSM03303060) is less than the amount paid from the scheme. The member will be liable to the unauthorised payments charge. The scheme administrator will not be liable to the scheme sanction charge if the amount of the lump sum would have been a pension commencement lump sum if the rules on protection of lump sums with enhanced protection had not applied - see RPSM03105220 and RPSM03105230.