What is 'pension benefit protection'?

It's nothing to worry about unless your pension benefits are very large, in which case you can easily afford to pay a financial advisor to sort it all out for you ;-)

It means the total amount you have in all pension investments - for those quoted as an annual amount (eg defined benefit) multiply by 20.

Thanks for the fast reply Andy. I'm taking a comfortable but by no means extravagant monthly pension, so I'm reassured. I'm still curious about the definition of this 'pension benefit' at any specific date? I don't recall ever seeing such a figure. But then, as long as my monthly pension gets paid each month, I've never had cause to look too hard.

For a money purchase scheme it's basically the value of the pot at the time. For a defined benefit scheme it's the annual amount multiplied by 20. With added complications like lump sum eligibility and different rules if pensions are already in payment. This explains it in more detail:

When the pension rules were revamped by the Revenue a few years ago (it was called 'simplification') a cap was placed on the maximum that anyone could fund for. Initially this cap was 1.5 m and known as the lifetime limit. However, some people might already have had funds worth that much, so what to do about them without penalising them? They could apply for primary protection. This means that they could keep what they had, but not fund any more.

As far as you are concerned, and without going into the finer points of all this, if your fund (or 'calculated fund' if you are a member of an unfunded pension scheme such as teachers' or local government) is less than 1.5m and not likely to get there in your lifetime (allowing for the increase in the allowance over the years) then protection need not concern you. Most people will be in this position!

Rob Graham

Andy, Rob:

Thanks both, appreciate the follow-ups.

I think the letter from my ex-employer could have avoided such questions (I bet I wasn't not the only one) if it had prefaced the bald facts it gave with such an explanation as yours.