RPSM03106070 - Technical Pages: Protecting pension rights from tax charges: Taking benefits before normal minimum pension age: Transfers

Transfers

[Paras 22(5 - 6) & 23(5 - 6) Sch 36] [The Pension Schemes (Block Transfers) (Permitted Membership Period) Regulations 2006 - SI 2006/498]

Protection will be retained where a member with a protected pension age becomes a member of another registered pension scheme as a result of a block transfer. For the avoidance of doubt this requirement applies to both uncrystallised and crystallised rights. If a transfer is not a block transfer there will be no protected pension age under the receiving scheme.

A transfer is a block transfer if it involves the transfer in a single transaction of all the sums and assets representing accrued rights under the scheme from which the transfer is made which relate to the member and at least one other member of that pension scheme. To be a single transaction

• all of the sums and assets must be transferred from the transferring scheme to only one receiving scheme. Two or more partial transfers to two or more different schemes cannot be a transfer in a single transaction; and
• the transaction must be made under a single agreement for a single transfer between the two schemes.

It is not necessary that all of the sums and assets are all physically passed from the transferring scheme to the receiving scheme on the same day - there may be legal or administration reasons why this is not possible. However they should all be transferred in relation to the agreement to transfer and within a reasonable timescale.

There is no restriction on the type of registered pension scheme receiving the transfer. So a personal pension scheme can receive a block transfer as long as the other block transfer conditions are met.

Because of the nature of the scheme a retirement annuity contract and a deferred annuity contract (section 32 policy) cannot normally make a block transfer as there is only one member in the scheme. Similarly an occupational pension scheme that only has one member, e.g. an individual arrangement, cannot normally make a block transfer as there are not enough members for a block transfer to take place. The only time a single member scheme can make a block transfer is when the conditions set out in RPSM03106072 are met.

Transferring rights for a member from one arrangement whilst retaining benefit rights in another arrangement in the scheme is a partial transfer and so cannot be block transfer. The remaining rights under the transferring scheme will retain protection. Those rights that have been transferred to the new scheme will have no protection.

Before the transfer, the member must not have already been a member of the registered pension scheme to which the transfer was made for longer than 12 months before the date of the transfer. If the receiving scheme was approved as a personal pension scheme and the individual was a member on 5 April 2006 any period of prior membership is ignored where the member’s rights before the transfer consist of only contracted out rights.

In this context a member includes not only active members, but also deferred members, pensioner members and pension credit members. For example if an individual is not an active member of the receiving scheme but is a deferred member (having deferred benefits held under the scheme) and has been a deferred member for more than 12 months before the transfer is made the transfer cannot be a block transfer.

Following a block transfer, the member retains the protected pension age that he had on 5 April 2006 in the previous scheme. Successive block transfers can be made without affecting the member's protection.