RPSM03106020 - Technical Pages: Protecting pension rights from tax charges: Taking benefits before normal minimum pension age: Right to take benefits from age 50

Retirement benefits schemes: members with a right to take benefits from age 50

From 6 April 2010, benefit payments to a member under the normal minimum pension age of 55 incur tax charges, unless

• the member has a protected pension age,
• the benefits are paid on incapacity, or
• the member started taking those benefits before 6 April 2010 having reached the normal minimum pension age of 50.

Some members of retirement benefits schemes and deferred annuity contracts (section 32 policies) had a right at 5 April 2006 to take pension benefits at their request from an age from 50 onwards. These rights can be protected so that payments below age 55 on or after 6 April 2010 do not incur tax charges.

The age at which the member has the right to take their pension on 5 April 2006 becomes their protected pension age from 6 April 2010. The tax charge does not affect them before 6 April 2010, as the normal minimum pension age is 50 until that date.

For these rights to be protected

• the member must have had the right on 5 April 2006 to take a pension and/or lump sum at a minimum age from 50 to 54,
• the right must be unqualified (in that no other party need consent to the individual’s request before it becomes binding upon the scheme or contract holder),
• the provision to pay benefits before age 55 must have been set out in the governing documentation of the retirement benefit scheme or deferred annuity contract (section 32 policy) on 10 December 2003 (the date of the second Inland Revenue "consultation document"), and
• the member must have

For example, on 10 December 2003 a scheme may give its members an unqualified right (that is, without the employer or trustees' agreement being necessary) to take pension benefits before 55, but only if they are made redundant. If any members are made redundant after 5 April 2010, are aged over 50 but under 55 and exercise their right to take pension benefits, they will have a protected pension age and will not be liable to a tax charge.

RPSM03106025 gives more information on what is meant by an unqualified right to take benefits.

See RPSM03106060 to RPSM03106072 for other conditions that apply to taking benefits before normal minimum pension age.