Wealthy pension savers who have used “fixed protection” arrangements to shelter their pension pots run the risk of being hit with six-figure tax bills due to a “ludicrous” quirk in rules designed to make the pensions system fairer. The problem centres on payouts for people with larger pensions who took action to protect their retirement funds from successive cuts to the lifetime allowance, which governs how big a pension can grow before tax charges apply. The compensation payouts risk invalidating “fixed protection” arrangements on those with retirement funds worth more than £1m, which could land savers with hefty tax charges of up to 55 per cent of savings in breach of limits.
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