RPSM03307032 - Scheme Administrator Pages: Protecting pension rights from tax charges: Benefit payments - other forms of protection: Pension age conditions

Conditions for paying benefits before normal minimum pension age

To be an authorised payment any pension and/or lump sum benefits taken before normal minimum pension age using a protected pension age must meet the following conditions.

All benefits must crystallise at the same time

All the benefits held in respect of the member under the registered pension scheme (apart from any benefits that came into payment before 6 April 2006) must crystallise at the same time.

Some schemes may be designed so that benefits become payable at different ages, e.g. some benefits are payable before the normal minimum pension age (because the member qualifies for protection) and some benefits are payable after having reached normal minimum pension age. For the avoidance of doubt, unless the member meets the ill health condition (see RPSM08100070), if the individual wishes to take any benefits before normal minimum pension age then all their benefits in the scheme must crystallise.

If the individual were to crystallise only those benefits benefiting from a protected pension age and left other uncrystallised benefits in the scheme (whether or not they are held in a different arrangement) those benefits would be unauthorised. Every payment made until the member reached normal minimum pension age would be an unauthorised member payment and taxable as such (see RPSM04104000). In addition when the member did reach normal minimum pension age they would not be entitled to a pension commencement lump sum in respect of the pension paid before normal minimum pension age.

Employment after benefit entitlement may trigger loss of protection

Where the member is entitled to a protected pension age due to their membership of a retirement benefits scheme or deferred annuity contract (see RPSM03307031) the right to take benefits before normal minimum pension age will be lost if the member is employed by certain persons. The type of restriction on employment after becoming entitled to benefits depends on whether the member’s protected pension age is below 50 or in the range 50 – 54.

For individuals with a protected pension age below 50 see RPSM03307033.

For individuals with a protected pension age of 50 to 54 see RPSM03307034.