RPSM03106025 - Technical Pages: Protecting pension rights from tax charges: Taking benefits before normal minimum pension age: Unqualified rights

What is meant by an unqualified right to take benefits

An individual has an unqualified right to take benefits if they do not need the consent of anybody before they can take their benefits. If the scheme documentation states that the consent of the trustees or employer is required to take benefits the member does not have an unqualified right to take benefits. (It does not matter that the trustees have always operated their discretion to allow the payment of early benefits, the right is still not an unqualified right.)

Some rules give members an unqualified right to take benefits but only when a certain contingency occurs. It is only when the contingency occurs that the rules of the registered pension scheme give a member the unqualified right to take benefits before age 55 and that they will have a protected pension age. So unless and until the relevant contingency actually occurs in respect of them, the members do not have a protected pension age.

For example, on 10 December 2003 a scheme may give its members an unqualified right to take pension benefits before 55, but only if they are made redundant. If any members are made redundant after 5 April 2010, are aged over 50 but under 55 and exercise their right to take pension benefits, they will have a protected pension age and will not be liable to a tax charge.

Similarly on 10 December 2003 a scheme may not allow active members to take benefits early without trustee and/or employer consent but give deferred members an unqualified right to early payment of benefits from age 50. If an individual leaves pensionable service and becomes a deferred member in accordance with the scheme rules and exercises their right to take benefits before age 55 they will have a protected pension age. No protection will be given to those who are not deferred members, as they have not met the condition that allows them an unqualified right to take benefits.