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

Winding up of schemes in existence on 5 April 2006

[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 all the following conditions are met.

1. The transfer is made from a scheme that was in existence before 6 April 2006 that is deemed to become a registered pension scheme on that date and is either

2. The transferring scheme is being wound up, and before the start of the scheme wind up the member had the right to a protected pension age. Where the scheme started to wind up before 6 April 2006 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.
   
3. A single annuity contract must be purchased. The purchase of the annuity must discharge all the member’s rights under the scheme and the annuity must satisfy the conditions specified in section 74(3)(c) Pension Act 1995.
   
4. The annuity contract does not authorise the making of any payment that would be an unauthorised payment (see RPSM04104000).
   
5. The annuity contract does not provide for the immediate payment of benefits so that it is treated as becoming a registered pension scheme on the day the contract is made in accordance with s153(8).

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.

These provisions do not apply to pension schemes that do not automatically become registered pension pensions on 6 April 2006. Any transfer to a deferred annuity contract from such a scheme will not be a block transfer.

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.