RPSM03104095 - Technical Pages: Protecting pension rights from tax charges: Enhanced protection: Cessation: New arrangement

Setting up a new arrangement may cause loss of enhanced protection

Where the reason for the member joining the new arrangement is

• to receive a permitted transfer
• as part of a retirement-benefit activities compliance exercise - see RPSM03104096, or
• as part of an age-equality compliance exercise - see RPSM03104096

enhanced protection will not be lost.

Where an individual joins a new pension arrangement and accrues benefits, either retirement or/and death benefits, under the arrangement enhanced protection will be lost.

A new arrangement is an arrangement that is new to the individual, i.e. they were not previously a member of the arrangement. So the arrangement can be one that has previously been in existence for other members and can be either in the same pension scheme or in a different pension scheme.

Whether or not an individual joins a new arrangement is a question of fact and will be influenced by the design of the scheme. It is possible for a scheme to have more than one arrangement of the same type, e.g. two defined benefits arrangements, for the same individual.

Where individual starts to accrue a new type of benefit under the scheme after 5 April 2006 this must be via a new arrangement. For example a member being provided with only defined benefits under a scheme before 6 April 2006 but who then starts to accrue money purchase benefits will become a member of a new money purchase arrangement and so would lose enhanced protection.

A scheme may increase the rate of benefits provided or even offer new extra benefits without having to provide it by a new arrangement. This is as long as the individual is a member of the same type of arrangement under the scheme on 5 April 2006 as the form of the benefits provided after 5 April 2006. For example a member of a defined benefits arrangement on 5 April 2006 has a new form of benefit provided after that date. These new benefits are also defined benefits and so do not have to be provided by a new arrangement. But even where the benefits provided after 5 April 2006 are the same as the type of benefits provided before 6 April 2006 a scheme may choose to provide the extra/new benefits via a new arrangement.

If the payment of a ‘relevant consolidation contribution’ to discharge the liability of an unfunded unapproved retirement benefits scheme in accordance with paragraph 48 Schedule 36 causes the start of a new arrangement, enhanced protection will be lost immediately.