RPSM03104096 - Technical Pages: Protecting pension rights from tax charges: Enhanced protection: Cessation: When a new arrangement will not cause loss of protection

When setting up the new arrangement will not cause loss of enhanced protection

Enhanced protection will not be lost where a new arrangement for an individual is set up under a registered pension scheme 

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

Retirement-benefit activities compliance exercise

An arrangement is set up as part of a retirement-benefit activities compliance exercise if all the following conditions are met.

1. The new arrangement is set up in connection with the cancellation of rights under an old arrangement relating to the individual.
2. The old arrangement is held under a registered pension scheme that is an occupational pension scheme and has some members who have not accrued retirement benefits, they only have the prospective right to pension and/or lump sum death benefits. In order to comply with section 255 Pensions Act 2004, or article 232 Pensions (Northern Ireland) Order 2005 those members whose rights consist only of prospective (lump sum and/or pension) death benefits are removed from the scheme. The old arrangement is cancelled to enable the scheme to comply with section 255 or article 232.
3. Both the old and new arrangement relating to the individual are in respect of the same employment and there are prospective rights to either (or both) pension death benefits (within the meaning of s167(1) FA 2004) or lump sum death benefits (within the meaning of s168(1) FA 2004) under both arrangements.
4. The prospective rights to death benefits conferred under the new arrangement are not significantly different from the rights conferred under the old arrangement.

If the prospective right to death benefits remain in the original registered pension scheme and the member’s prospective pension benefits are moved out instead this will not satisfy the requirements for a retirement-benefits activities compliance exercise. Unless the transfer of the prospective pension benefits is a permitted transfer the new arrangement will cause loss of enhanced protection.

Age-equality compliance exercise

An arrangement is set up as part of a age-equality compliance exercise if all the following conditions are met.

1. The new arrangement is set up in connection with the cancellation of rights under an old arrangement relating to the individual.
2. Both the old and new arrangement are in respect of the same employment and there are prospective rights to either (or both) pension death benefits (within the meaning of s167(1) FA 2004) or lump sum death benefits (within the meaning of s168(1) FA 2004) under both arrangements.
3. The old arrangement is cancelled and the new arrangement set up in order to comply with the Employment Equality (Age) Regulations 2006 or Employment Equality (Age) Regulations (Northern Ireland) 2006 - or any regulations amending or replacing these regulations.