RPSM03307034 - Scheme Administrator Pages: Protecting pension rights from tax charges: Benefit payments - other forms of protection: Pension age 50 to 54 - employment

Loss of protected pension age due to employment after taking benefits: protected pension ages in the range 50 to 54

The right to a protected pension age will be lost where the main purpose (or one of the main purposes) for early entitlement to benefits using a protected pension age is to avoid paying tax or national insurance contributions.

After 5 April 2010 a member of a retirement benefits scheme or deferred annuity contract becoming entitled to benefits before the normal minimum pension age because they have a protected pension age in the range 50 – 54 will lose their protected pension age if they are employed by a person listed below and one of the four re-employment conditions is not met.

Employers

• An employer who employed the member in the six months before benefit entitlement arose, and who was also a sponsoring employer in the scheme providing the benefits in that six month period;
• Any person connected with the employer described in the previous bullet point. Note that under this condition the person employing the individual does not need to be a sponsoring employer; or
• Any sponsoring employer in the pension scheme providing the benefits that is connected with the individual.

Connection has the meaning given in s839 ICTA 1988. The Capital Gains Manual – CG14580 to CG14624 – gives information on who connected person are for the purposes of s839 ICTA 1988.

If the member is not employed by one of these persons they will retain their protected pension age. If they are employed by an employer listed above the member can still retain their protected pension age as long as one of the following four re-employment conditions is met.

Re-employment conditions

1. recall by the Armed Forces
   
2. a break in employment of at least six months
   
3. a break in employment of at least one month and benefits may be abated
   
4. a break in employment of at least one month and the re-employment is materially different.

Once the individual reaches the normal minimum pension age of 55 the restrictions cease to apply.

RPSM03106064 and RPSM03106065 give more information about this restriction.