Tax-free cash protection on transfer - some common questions

Protecting tax-free cash on transfer is, and always has been, one of the most popular queries we receive. More specifically, what happens if an individual who is entitled to tax-free cash of more than 25% is transferring to another plan?

It's a tricky subject, so we've summarised the conditions where tax-free cash of more than 25% will survive a transfer and set out the answers to some of the more common questions we receive.

Some common questions

No - a s.32 is a single member scheme so there's no buddy to block transfer with. Tax-free cash protection would only apply if they were transferring to another s.32.

No, again there isn't a buddy - they'd have to wind-up the EPP and transfer to a s.32. Or they could transfer to a personal pension and accept that tax-free cash will drop to 25%.

Yes, if the block transfer conditions are met each time. If it was a wind-up transfer, tax-free cash protection would be maintained if all three conditions continued to be met. This means that a member could effectively transfer from S32 to S32 and continue to have protected tax-free cash indefinitely.

Yes, it would as long as both plans were part of the same scheme (most are). Stakeholder and personal pension plans are usually separate schemes however, so if one was going to a stakeholder scheme and another to a personal pension plan with the same provider, this wouldn't satisfy the block transfer rules.

The conditions

There are two main types of transfer where tax-free cash of more than 25% would be protected - a block transfer and a transfer where the scheme is being wound-up. The conditions that must be met are as follows.

Block (or buddy) transfer

  • More than one member of the scheme must transfer at the same time to the same scheme.
  • 'Same time' doesn't mean funds have to transfer on the same day, so long as the transfers are obviously meant to be part of the same transaction.
  • 'Same scheme' can mean to personal pension plans with the same provider.
  • All of the scheme benefits have to be transferred - a partial transfer doesn't protect tax-free cash.
  • And the member can't have been a member of the receiving scheme for longer than 12 months - a particular issue if they've already got a personal pension with the receiving provider.

Wind-up transfer

  • The member has protected tax-free cash.
  • The existing scheme must be winding up.
  • The receiving scheme must be a deferred annuity contract, usually a Section-32 plan.


The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. Also it may not reflect the options available under a specific product which may not be as wide as legislations and regulations allow.

All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.

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The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm is on the Financial Services Register, registration number 117672. It provides life assurance and pensions. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London, EC3V 0RL.