Pension lifetime allowance change could hit performance says Dentons

Advisers are being urged to check all clients coming up to and in-retirement to see whether they need to protect their fund against the reduction in lifetime allowance.

Dentons Pensions Management believes those who have experienced a good rate of investment return over the years could see their funds penalised by the reduction of the lifetime allowance from 1.8 million to 1.5 million, which comes into effect on 6 April 2012.

Martin Tilley (pictured), director of technical services said: "Individuals who have drawn benefits post A-Day are retested at age 75 against the lifetime allowance. Some, who have experienced good investment performance, might have a problem particularly with the lifetime allowance reducing to £1.5 million from April. This is a strange situation where good performance can be a bad thing for a client."

He advised: "I'd suggest advisers should be reviewing any post A-Day vested clients to see whether or not fixed protection should be applied for, as this will give them protection up to the current lifetime allowance of £1.8 million. Even, if this is just a precaution."

The group has seen an increase in technical queries from advisers in the run- up to the implementation of the reforms.