RPSM03201080 - Member Pages: Protecting pension rights from tax charges: Types of protection available: Benefits before the normal minimum pension age

Taking a pension before normal minimum pension age

From 6 April 2006 the new tax rules say that you cannot take pension and lump sum benefits from a registered pension scheme before the normal minimum pension age, unless you are in ill health.

Normal minimum pension age means:

• age 50 from 6 April 2006 to 5 April 2010, and
• age 55 from 6 April 2010

If you start taking benefits after having reached age 50 before 6 April 2010 but you are not yet 55 by 6 April 2010 you can continue to receive those benefits. If you want to crystallise further benefits after 5 April 2010, to be authorised payments you must have reached the normal minimum pension age of 55.

I was a member of an occupational scheme or deferred annuity contract

Some members of occupational pension schemes and deferred annuity contracts have a right to take their pension and lump sum benefits from age 50 onwards. Certain scheme members, usually sports people, have a right to take their pension and lump sum benefits before age 50. Where these members had the right on 5 April 2006 to take their pension and lump sum rights before age 55 transitional protection will be available where:

• they can take their pension and lump sum rights at that age without needing the consent of another person before it becomes binding upon the scheme or contract holder, and
• the right to take benefits before age 55 was set out in the governing documentation of the scheme on 10 December 2003 or the member acquired the right to take their benefits under the provisions of the scheme, upon joining the scheme after that date.

I was a member of a personal pension scheme or retirement annuity contract

Members of retirement annuity contracts or personal pension schemes will also be able to protect their right to take their pension and lump sum benefits before the normal minimum pension age if they had a right on 5 April 2006 to take a pension before the age of 50 and their occupation was one prescribed by HMRC. RPSM03106035 gives the list of prescribed occupations.

There is no protection for members of personal pensions or retirement annuity contracts who did not have the right to take benefits before age 50.

Is there anything else I should know about taking benefits before the normal minimum pension age?

There are certain conditions that must be met when paying benefits before normal minimum pension age. These are described in RPSM03201081.

Certain members, usually sports people or those in particular occupations with a right to take benefits before age 50, may have a reduced lifetime allowance when they take benefits before 50 - see RPSM03106080.

A transitionally protected pension age will be lost if you transfer your pension rights (uncrystallised or crystallised) to another scheme unless the transfer is a block transfer. RPSM03106070 explains exactly what a block transfer is. However broadly a block transfer must involve at least 2 scheme members transferring out of the same scheme at the same time. The transfer must be made to the same pension scheme at the same time and neither individual can have been a member of the scheme receiving the transfer for more than 12 months before the transfer.

Protection will also 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.