RPSM03105641 - Technical Pages: Protecting pension rights from tax charges: Lump sums: Scheme specific protection: Stand-alone lump sum - transfers

Transfers that cause the member to lose their right to payment of a stand-alone lump sum

[Article 25D(4) - (9) The Taxation of Pension Schemes (Transitional Provisions) Order 2006 - SI 2006/572]

Transfers out

If a transfer is made out a scheme that has the right to pay a stand-alone lump sum the right to a stand-alone lump sum will continue in the scheme receiving the transfer where the transfer is a block transfer (see RPSM03105521) to a registered pension scheme under which the member has no rights before the transfer, i.e. they are not already a member.

Any other transfer out (including a block transfer) will result in the loss of the right to a stand-alone lump sum unless (as described below) the transfer is to another scheme under which the individual already has the right to a stand-alone lump sum and the conditions set out below are met.

Where the transfer is a block transfer and the individual was a member of the receiving scheme before the transfer the right to a protected pension commencement lump sum will be kept subject to the other payment conditions for such a lump sum being met (see RPSM03105520).

[Article 17 The Pension Schemes (Transfers, Reorganisations and Winding-up)(Transitional Provisions) Order - SI 2006/573]

Article 17 treats a deferred annuity contract purchased or assigned on the winding up of a registered pension scheme as if that deferred annuity contract was the same scheme as the winding up scheme. This means that, subject to all the other conditions being, the right to payment of a stand-alone lump sum can continue. The annuity condition set out in RPSM03105523 has to be met as does the winding up conditions (but for right to a lump sum of more than 25% read right to a stand-alone lump sum).

Transfers in

Where a scheme under which a member has the right to a stand-alone lump sum receives a transfer from a registered pension scheme the member will lose the right to payment of a stand-alone lump sum unless

• the transfer comes from a scheme where immediately before the transfer the member had the right to the payment of a stand-alone lump sum,
• all of the member’s uncrystallised rights are transferred from the transferring scheme to the receiving scheme, and
• the receiving scheme has not paid out a stand-alone lump sum or a pension commencement lump sum to the individual before the transfer was made.

A transfer in from a non-registered pension scheme will trigger the loss of the right to a stand-alone lump sum.