RPSM09102150 - Technical Pages: Member benefits: An unsecured pension: Overview: Transferring an unsecured pension fund or a short term annuity

This guidance only covers members who became entitled to an unsecured pension before 6 April 2011. If the member became entitled to their pension on or after 6 April 2011 then see the guidance at RPSM09103500.

Transfer of an unsecured pension fund and a short-term annuity

Transfer within a registered pension scheme

An unsecured pension fund held under a money purchase arrangement cannot be transferred to another arrangement held under that same registered pension scheme. If such a transfer is made the provisions of the tax legislation effectively disregard that transfer, treating the unsecured pension fund as still being held under the original arrangement.

This ensures that funds cannot be transferred between different arrangements in the same scheme in order to draw more annual income than would be permitted by the unsecured pension rules. It will also prevent the designation of funds into the new arrangement, creating a benefit crystallisation event, with the opportunity to draw a further tax-free lump sum in connection with the designation.

Transfer to another registered pension scheme

The Registered Pension Schemes (Transfers of Sums and Assets Regulations 2006 (SI 2006 No 499) Regulation 12 provides that an unsecured pension fund may only be transferred to another registered pension scheme if the transfer is to a new arrangement under that scheme that has no other sums or assets held in it. If this is not done the transfer will not be a ‘recognised transfer’, and the transfer payment will represent an unauthorised member payment. The member will then become liable to an unauthorised payments charge on the payment.

These regulations also specify the extent to which the sums and assets transferred are treated in the same way under the new arrangement as they were under the old.

Transfer of a short-term annuity to a new insurance company

[Para 6(1B) to (1D), Sch 28][Para 14, Sch 10, FA 2005] [Reg 7 The Registered Pension Schemes (Transfers of Sums and Assets) Regulations 2006 (SI 2006/499)] 

A short-term annuity held by an insurance company may be transferred to another insurance company only as long as it is replaced by a new short term annuity with the receiving insurance company - see RPSM09101820.