Primary protection works by ‘modifying’ the individual’s standard lifetime allowance. The result is achieved by determining a ‘primary protection factor’ and applying it at each subsequent benefit crystallisation event (BCE).
The factor is found through the simple:
(RR – SLA)/SLA
RR is the value of the individual’s pension rights at 5 April 2006; and
SLA is £1.5m.
For example, suppose the value of funds was £3m. The factor is (£3m – £1.5m)/£1.5m = 1.