- Protected tax-free cash and early retirement age can be retained when transferring, if done as a block transfer
- There are four conditions for a transfer to qualify as a block transfer
- You must fully crystallise all benefits in the scheme to utilise your protected benefit
Key takeaways from this article
What is a block transfer?
A block transfer is a means of keeping a protected benefit when transferring to another scheme.
Why is a block transfer needed?
It is possible for you to have a pension scheme that holds:
- scheme specific protected tax-free cash that is higher than 25% of the lifetime allowance, OR
- an early retirement age below the minimum pension age
Where this is the case, these protected benefits will be lost when transferring to a new scheme unless it is done as a block transfer or as part of a scheme wind up.
Conditions applying to block transfers
A transfer is a block transfer if:
- it is a transfer of the member and at least one other pension scheme member at the same time
- the transfer is made as a single transaction
- the transfer represents all the pension rights under the scheme for all the members transferring as part of that single transaction, and
- before the transfer the member had not been a member of the new scheme for more than 12 months*.
*Unless the member only holds contracted out money in their policy
|
You can only hold one level of scheme specific protected tax-free cash/early retirement age within a scheme. So, if you do another block transfer, any protected benefits on that transfer will fall away. Only the protected benefits from the first transfer will remain and any subsequent protected benefits transferred in will be treated as a normal transfer. |
Scheme wind up
Where a scheme is winding up and the members' benefits are either transferred to a section 32 policy or assigned to the member directly, this will be treated the same as a block transfer and the protected benefits will be retained.
Block transfer scheme compatibility
This table shows which schemes are compatible with a block transfer, i.e. can have a transfer whilst retaining either protected tax-free cash or early retirement age.
|
FROM |
TO |
PROTECTED BENEFIT RETAINED? |
|
Personal pension |
Personal pension |
Yes, if done as a block transfer |
|
Personal pension |
Section 32 policy |
No |
|
Personal pension |
Occupational pension |
Yes, if done as a block transfer |
|
Section 32 policy |
Personal pension |
No |
|
Section 32 policy |
Section 32 policy |
Yes, as the transfer will result in the section 32 winding up with no benefits left after transfer |
|
Section 32 policy |
Occupational pension |
No |
|
Occupational pension |
Personal pension |
Yes, if done as a block transfer |
|
Occupational pension |
Section 32 policy |
Yes, if scheme is winding up |
|
Occupational pension |
Occupational pension |
Yes, if done as a block transfer |
Taking benefits after transfer
When you come to access the protected benefits, you can only do so if all benefits within the scheme come into payment at the same time. In other words, you must fully crystallise everything within the scheme.*
This means that if you already hold crystallised funds when you transfer in, you will not be able to meet this condition unless all the crystallised funds are withdrawn first.
For help with calculating the current value of scheme specific protected tax-free cash please use our calculator.
*Different rules apply for block transfers relating to the new higher minimum pension age of 57
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The information provided in this article is not intended to offer advice.
It is based on Quilter's interpretation of the relevant law and is correct at the date shown. While we believe this interpretation to be correct, we cannot guarantee it. Quilter cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained in this article.