Protected pension ages of 55 or 56
Block transfers have been with us since 6 April 2006. They can protect on transfer both the normal minimum pension age at which someone can take their private pension benefits and rights to any higher scheme specific tax-free cash they may have.
Key facts
- The minimum pension age is increasing from 55 to 57 on 6 April 2028.
- A protected pension age of 55 or 56 is maintained on transfer, but what's protected depends on whether it is:
- a block (or buddy) transfer
- an individual transfer.
The minimum pension age at which private pension arrangements can be paid is rising from 55 to 57 on 6 April 2028. In some circumstances it is possible to maintain the right to take benefits before age 57. This right to a lower minimum pension age must be an unqualified right.
What is meant by an unqualified right?
This means the person does not need the consent of anybody before they can take their benefits. If the consent of the trustees or employer is required, the individual does not have an unqualified right to take benefits. It doesn’t matter if the trustees have always allowed the payment of early benefits, the right is still not an unqualified right.
What are the age 55 block transfer conditions?
Any rights to take benefits from 55 can also be protected on transfer if it is part of a block transfer. But, unfortunately the block transfer conditions for age 55 protection are slightly different to the earlier block transfer conditions.
For those protecting a right to a minimum pension age of 55, a block transfer needs to meet the following conditions:
- 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, as long as the transfers are obviously meant to be part of the same transaction.
In other words, the conditions are the same as the original block transfer conditions except:
- the individual can have been a member of the receiving scheme for any amount of time, and
- they don’t have to take all of their benefits in the receiving scheme at the same time.
The requirement for them to have unqualified right under the scheme rules also remains. However, this time it had to be in the scheme rules on 11 February 2021. This is the date the consultation paper on the increase to a normal minimum pension age of 57 was first published.
If their pension savings are block transferred, this means the right to take benefits from age 55 is also transferred to the receiving scheme. However, this only applies if the individual had the right to an age 55 normal minimum pension age before 4 November 2021.
Individual transfers
It’s also possible to preserve an age 55 normal minimum pension age when an individual transfers on their own and not as part of a block transfer. But these benefits need to be ringfenced and the protection only applies to the benefits from that transfer. This means any benefits resulting from further transfers received or contributions paid after the transfer will not benefit from the protected pension age of 55.
Transfer to a scheme that already has a protected pension age
An individual can transfer to a scheme where they already have a protected pension age of 55 or 56. Whether they benefit from the protected pension age will depend on how the plan was set up.
If the plan had been set up with an individual transfer, the protected pension age only applies to those transferred rights and subsequent transfers in won’t benefit from the protected pension age.
| Before 4 November 2021 | From 4 November 2021 | |
|---|---|---|
| Transfer from a scheme without an unqualified right to take benefits at age 551 to a scheme that does | Can transfer and have a right to take all benefits at age 551 in the new scheme. | Not possible unless the individual was in the process of transferring when the rules changed on 4 November 2021. |
| Individual transfer from a scheme with a protected pension age of 551 | It wasn’t possible to transfer and protect a minimum pension age of 551. | Transferred benefits with a protected pension age of 551 must be ringfenced in the new scheme. All other benefits and future benefits stay at 57. |
| Block transfer from a scheme with a protected pension age of 551 | All benefits transferred, existing and future benefits will have a pension age of 551. | All benefits transferred, existing and future benefits maintain a protected pension age of 551. |
1 Unlikely, but it is possible the protected pension age in the original scheme was 56, if so the protected pension age in the new scheme will be 56.
Further information
- Increase in normal minimum pension age in 2028 - Royal London for advisers
- HMRC Pensions Tax Manual - PTM028000: General principles: Pension age
- HMRC Pensions Tax Manual - PTM062200: Member benefits: pensions: protected pension age: contents
- HMRC Pensions Tax Manual - PTM062215: Member benefits: pensions: protected pension age: right to take benefits before age 57
- HMRC Pensions Tax Manual - PTM062250: Member benefits: pensions: protected pension age: right to keep a protected pension age after transfers 2028
- HMRC Consultation & response - Increasing the normal minimum pension age
Disclaimer
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.