RPSM03106072 - Technical Pages: Protecting pension rights from tax charges: Taking benefits before normal minimum pension age: Scheme wind ups

Winding up of schemes

[Articles 13 - 16 The Pension Schemes (Transfers, Reorganisations and Winding Up)(Transitional Provisions) Order 2006 - SI 2006/573]

The transfer of all the benefit rights in respect of a member after 5 April 2006 to a deferred annuity contract will be treated as if it were a block transfer where

• the winding up scheme condition, and
• the annuity condition

are met.

Where these conditions are met the deferred annuity contract is treated as having become a registered pension scheme on the date

• the contract was made (for a purchased annuity policy), or
• the policy was assigned (for an assigned policy).

The transfer is treated as if it were a block transfer and so the member will continue to have a protected pension age.

Transfers to a registered pension scheme that is not a deferred annuity contract made on the winding up of a pension scheme may be a block transfer under the normal block transfer provisions - see RPSM03106070.

If the transfer on winding up of the scheme is not a block transfer because neither the conditions on this page nor RPSM03106070 have been met protection will be lost following the transfer.

The winding up scheme condition

The transfer is made from a registered pension scheme that is winding up

Before the start of the scheme wind up the member had the right to a protected pension age under paragraph 22 Schedule 36 FA 2004, i.e. because the scheme met the conditions at RPSM03106020 or RPSM03106040, or because protection has continued due to a block transfer from such a scheme.

Where the scheme started to wind up before 6 April 2006 and the scheme was either

• a retirement benefits scheme, or
• an annuity contract which is used to secure benefits provided by a retirement benefits scheme but which does not provide for the immediate payment of benefits - a section 32 policy

this condition will be met if the member would have had a right to a protected pension age if the scheme had started to wind up on or after 6 April 2006.

A deferred annuity contract (section 32 policy) set up before 6 April 2006 will automatically become a registered pension scheme on 6 April 2006 and so will be covered by these provisions. For the avoidance of doubt any retirement benefits scheme or deferred annuity contract that has only one member is covered by these provisions. How and when a scheme (including single member schemes) wind up is a question of fact. Scheme rules normally contain provisions stating what can trigger a scheme wind up.

A scheme may have several employers participating in a scheme. Where an employer ceases to participate and leaves the scheme securing all the member’s rights from that employment outside the scheme, e.g. by transfer or annuity purchase, such a partial wind up will constitute a scheme wind up for the purposes of these provisions.

The annuity condition

This condition is met where the member’s rights under the scheme have been extinguished by either

• the purchase of one annuity policy that does not provide for the immediate payment of benefits and does not authorise the making of any payment that would be an unauthorised payment (see RPSM04104000), or
• the assignment to the member of one annuity policy

The annuity policy must satisfy the conditions that are specified in section 74(3)(c) Pensions Act 1995. This simply means the requirements prescribed by that section, so the purchase or assignment of an annuity from any type of pension scheme, defined benefits, cash balance, or other money purchase should be capable of meeting these conditions