PTM062250 - Member benefits: pensions: protected pension age: right to keep a protected pension age after transfers 2028

As of 6 April 2024 there is no longer lifetime allowance. If you are looking for information about protections, enhancement factors and the lifetime allowance charge please see these pages on The National Archives. If you are looking for information about the principles of lifetime allowance and benefit crystallisation events please see these pages of The National Archives.

Glossary PTM000001
 

Transfers
Block transfers
Individual transfers

Transfers

Paragraphs 23ZB and 23ZC schedule 36 Finance Act 2004

A member with a protected pension age under a pension scheme will lose that protection if they transfer to another scheme unless the transfer is:

For the avoidance of doubt this block transfer requirement applies to both uncrystallised and crystallised rights.

If the member keeps protection because the transfer is a block transfer their protected pension age under the transferring scheme becomes the protected age under the receiving scheme. The receiving scheme also ‘inherits’ the payment condition from the transferring scheme.

For individual transfers, the member can transfer their pension rights at arrangement level and retain their 2028 protected pension age in the receiving scheme. There is no requirement for the member to have a protected pension age already in the receiving scheme.

Block transfers

Paragraph 23ZB schedule 36 Finance Act 2004

For the purposes of the 2028 protected pension age, a transfer that takes place on or before 3 November 2021 is a block transfer if:

  • the transferring members and the transferring scheme both had an actual or prospective right to take benefits from age 55 or 56
  • on 11 February 2021 the scheme rules included a provision to pay benefits before age 57 
  • the transferring members had an unqualified right to take pension or lump sums, or both, before they reached the age of 57
  • it is a transfer of the pension rights relating to the member and at least one other member of the same pension scheme
  • the transfer is made as a single transaction, and
  • the transfer represents all the pension rights under the scheme for all the members transferring as part of that single transaction.

The following conditions apply to block transfers that take place on or after 4 November 2021:

  • the transferring members and the transferring scheme both meet the entitlement condition (see the 'eligibility requirements' section of PTM062215)
  • it is a transfer of the pension rights relating to the member and at least one other member of the same pension scheme
  • the transfer is made as a single transaction, and
  • the transfer represents all the pension rights under the scheme for all the members transferring as part of that single transaction.

In contrast to the 2010 protection framework, the 2028 framework:

  • has no restrictions on the membership period of the receiving scheme – the 12-month 'permitted membership period' is not a requirement
  • does not require all of the member’s rights to come into payment at the same time
  • places no restriction on the member’s re-employment after taking benefits.

Once a block transfer has taken place, the member should retain the protected pension age they had in the previous scheme and successive block transfers can be made without affecting the member’s protection.

If more than one block transfer took place between 11 February 2021 and 3 November 2021, the member will retain the protected pension age if the original scheme included a provision on 11 February 2021 for the member to take their benefits before the age of 57.

If the block transfer requirements have all been met, the member’s protected pension age is the higher of 55 and the age from which the member had the right to take their pension benefits before 4 November 2021.

Example

Mohammed and Keeleigh are members of a scheme on 11 February 2021 which included a provision for them to take their benefits from the age of 55. They both transfer their benefits as a single transaction to the Money Bags Pension Scheme on 31 October 2021. They no longer have any rights under the previous scheme. The Money Bags Pension Scheme has a minimum pension age of 60. As Mohammed and Keeleigh have made a block transfer within the timescale, they retain the protected pension age of 55. Any benefits which Mohammed and Keeleigh accrue in the Money Bags Pension Scheme will also have a protected pension age of 55.

Individual transfers 

Paragraph 23ZC schedule 36 Finance Act 2004 

Members with a protected pension age of 55 or 56 can transfer their pension rights at individual arrangement level and retain their 2028 protected pension age in the receiving scheme. The whole arrangement must be transferred, but it isn’t a requirement to transfer all arrangements held within the scheme. There is no requirement for the member to have a protected pension age already in the receiving scheme. 

The 2028 protected pension age doesn’t apply to other sums or assets already held in the receiving scheme, or any that are subsequently put into the scheme either by pension contribution or transfer. The protected pension age will only apply to the sums and assets transferred and the income arising from those sums. The aim is to protect the transferred pension rights, not enhance them, so the protected transferred rights will require ring-fencing in the receiving scheme. 

The 2028 protected pension age should also be retained by the member on subsequent relevant transfers. However, the protected pension age won’t apply to other sums or assets held already in the receiving scheme. 

The 2028 protection provisions will also operate in the same way where the transfer is from a registered pension scheme to a qualifying recognised overseas pension scheme (QROPS). So, if the individual has a 2028 protected pension age and there is an individual transfer, the individual will take their protection with them to the QROPS. However, if there was not a protected pension age previously, then a payment of pension before age 57 after 5 April 2028 will be an unauthorised payment unless the member is retiring due to ill-health (see PTM062100). See PTM113210 for details of when payments from non-UK pension schemes can be subject to unauthorised payments charges.

Example 

Jacek is a member of the JZ Pension Scheme and has a protected pension age of 55. He has 2 arrangements within this scheme; a defined benefit arrangement and a money purchase arrangement. Jacek transfers his money purchase arrangement to the Cherry Blossom Pension Scheme but keeps his defined benefit arrangement in the JZ Pension Scheme. 

The money transferred to the Cherry Blossom Pension Scheme is ring-fenced at Jacek’s protected pension age of 55. Jacek continues to contribute to the Cherry Blossom Pension Scheme, but can only take benefits arising from the money transferred from the JZ Pension Scheme at age 55. Benefits relating to the contributions Jacek made after the transfer can only be taken from normal minimum pension age.