Formerly pension scheme members with schemes carrying a higher entitlement to tax free cash or an early retirement age would loose these when transferring to a new plan, unless at least one other member of the same scheme transferred with them at the same time, to the same scheme. For schemes without any other members, such as section 32 plans, one person EPPs or assigned policies, this meant that the option to preserve protections when transferring to personal pensions was not available.
However, solo transfers are now permissible, as long as the following criteria are met:
• The transfer must fully extinguish all rights within the current plan
• The transfer must be made in a single transaction
• The transfer must be completed before 6 April 2015
• The new plan must be fully crystallised (including any other rights held within the new plan) before 6 October 2015
• Benefits are payable from age 55 (unless a protected retirement age is available).
As the transfer must be completed before 6 April, the investor would also have the choice to set up a capped drawdown arrangement, should they wish to retain the higher annual allowance. It should also be noted that any GMP benefits will be lost on transfer.
So what does this mean?
Pension scheme members who have held off transferring their benefits due to a potential loss of tax free cash or because they will loose the ability to retire early may now make an individual transfer to a new plan without loosing the enhanced benefits.
Who does this affect?
• Sports people and members of professions who were previously entitled to early retirement ages
• Members of occupational defined contribution pension schemes such as Executive Pensions, Small Self Administered Schemes (SSAS), Contracted Out and Contracted In Money Purchase Schemes (COMPs and CIMPS)
• Those who have transferred their benefits to a Section 32 Buy-Out
This is a complex area and advice from a pensions specialist should always be taken before implementing any transactions.