PTM062205 - Member benefits: pensions: protected pension age: basic principles

Glossary PTM000001
 

What is protected pension age?
The position as at 6 April 2006 (2010 protection)
The position as at 4 November 2021 (2028 protection) 
How does a protected pension age work?
Occupational or public service schemes
Personal pension schemes and retirement annuity contracts (RACs)

What is protected pension age?

Since 6 April 2010 the normal minimum pension age is 55. (It was 50 for the period 6 April 2006 to 5 April 2010). From 6 April 2028 the normal minimum pension age will increase to age 57. Any pension (and most lump sums) paid before the member reaches normal minimum pension age will be an unauthorised payment unless the member:

  • is retiring due to ill-health (see PTM062100), or
  • has a protected pension age. 

Before 6 April 2006 some individuals had the right to start taking their pension before normal minimum pension age. If certain conditions are met those individuals may still take benefits before they are 55 (age 57 from 6 April 2028) as an authorised payment. The earliest age at which the member had a right to take benefits is known as the member’s protected pension age.

An individual’s protected pension age is specific to a particular registered pension scheme. For example, an individual could have a protected pension age of 50 under one scheme and a protected pension age of 52 under another pension scheme.

There is no requirement for the member to register this form of protection with HMRC. The legislation automatically provides for the member to be protected if the specified conditions are met. Scheme administrators will be able to tell the member if their right to take benefits has been protected in their scheme. 

Whilst the member may have a protected pension age under a pension scheme, this does not mean the scheme has to pay benefits from the member’s protected pension age.

The position as at 6 April 2006 (2010 protection)

Section 279(1) and paragraphs 21 to 23ZA schedule 36 Finance Act 2004

How an individual qualifies for a protected pension age, and the conditions for using that protected pension age, depend on the type of pension scheme they were a member of on 5 April 2006. 

An individual can lose their right to a protected pension age if they transfer their pension rights out of the pre-6 April 2006 scheme. The member will lose their protected pension age unless the transfer is a block transfer, or they are transferring to another protected scheme. PTM062240 explains what a block transfer is, and when protection is lost following a transfer.

Where the conditions for using a protected pension age are met, the protected pension age applies to all benefits the member can take under the scheme. This includes new benefits built up after 5 April 2006 and any benefits in respect of a transfer into the pension scheme.

The position as at 4 November 2021 (2028 protection)

Section 279(1) and paragraph 23ZB schedule 36 Finance Act 2004 

The normal minimum pension age will increase from age 55 to age 57 from 6 April 2028. Members of uniformed service pension schemes are exempt from the increase in the normal minimum pension age. There are no changes for those members who already have an existing 6 April 2006 protected pension age of 55. 

A new protected pension age framework has been put in place for members of registered pension schemes. To have a protected pension age of under age 57 from 6 April 2028, the rules of the pension scheme must have included an unqualified right for members to take pension benefits below age 57. 

Members who were in the process of a substantive transfer to a scheme at 4 November 2021 will be entitled to scheme benefits before age 57.  

How does a protected pension age work?

Paragraph 21 schedule 36 Finance Act 2004

Where a member has a protected pension age the tax rules provide that, with one exception, their protected pension age replaces the standard normal minimum pension age. So:

  • in deciding whether or not a pension payment satisfies pension rule 1 (see PTM062100), or
  • where a lump sum payment condition requires the member to have reached normal minimum pension age

substitute the member’s protected pension age for the standard normal minimum pension age of 55 (age 57 from 6 April 2028).

Paragraphs 19 and 23A schedule 36 Finance Act 2004

The exception to this rule affects members with a protected pension age of less than 50 when they have a relevant benefit crystallisation event before age 55 (age 57 from 6 April 2028). Paragraph 19 schedule 36 provides that such members may have a reduced available lump sum allowance and a reduced lump sum and death benefit allowance. PTM172000 provides further guidance about relevant benefit crystallisation events and how such members’ allowances are reduced when they take certain benefits before the standard normal minimum pension age of 55 (age 57 from 6 April 2028). Where an individual has a reduced lump sum allowance under paragraph 19, their maximum pension commencement lump sum will also be reduced. 

Members of certain public service pension schemes are not affected by the reduction in the allowances. See PTM062210 for more details.

Occupational or public service schemes

Paragraph 22 schedule 36 Finance Act 2004

Paragraph 22 schedule 36 provides transitional protection of an early pension age for members of these types of pension scheme. Members of these schemes on 5 April 2006 may have a protected pension age if on 5 April 2006 they had a right to take benefits before age 55. The protected pension age continues when the normal minimum pension age increases on 6 April 2028, unless the member loses that protection.

PTM062210 provides guidance on how a member of an occupational or public service scheme on 5 April 2006 can qualify for a protected pension age of less than 55.

After taking benefits using a protected pension age, the member can lose their protection in certain circumstances. PTM062230 provides guidance on when an individual loses their protection. Any pension paid after the member loses their protection until the member reaches age 55 (age 57 from 6 April 2028) will be an unauthorised payment.

Personal pension schemes and retirement annuity contracts (RACs)

Paragraph 23 schedule 36 Finance Act 2004

Paragraph 23 schedule 36 provides transitional protection of an early pension age for members of personal pension schemes (PPs) and RACs. Only certain individuals who were members of these types of pension scheme on 5 April 2006 may have a protected pension age. Protection is available only to those individuals who on 5 April 2006 had the right to take benefits before age 50.  There is no protection of the right to take benefits from age 50 and before age 55 under paragraph 23 schedule 36.

PTM062220 provides guidance on how a member of a PP or RAC on 5 April 2006 can qualify for a protected pension age of less than 50.