Dave225 Posted December 19, 2011 Share Posted December 19, 2011 To all you financial gurus out there. Am I correct in believing that come April 2012 all the restrictions currently in force regarding Protected Rights Benefits will be dropped? My wife has a miniscule Protected Rights pension fund that she accrued many years ago when it seemed a good idea to contract out. Unfortunately for other reasons her period of work and salary meant that the Fund has remained miniscule and the last quotation indicated she would receive the value of 3 cups of coffee per month. Not exactly riotous living as you can see. But as we are now retired I have been looking, like others aghast at the drop in annuity values and had decided that it was time to cash in and run with what we had. However the Protected Rights benefits insist on a joint annuity being taken which seems daft as a) I am older than my wife and b) she is expected to live longer than I. So the chances of my benefitting are slim unless a road accident occurs. I had even looked at cashing it under Triviality rules but her other pensions take her just above the line for Lifetime Allowance, so that is out. However, if my understanding is right after April 6th 2012 she can take a single life annuity on this particular part and can even combine it with her other private pension scheme and maybe we can get 12 cups of coffee per month. We could ask an IFA but at a value of 3 coffees per month he is not likely to be too excited or even let us in the door. Oh the fun of being part of the private sector!! Link to comment Share on other sites More sharing options...
Guest peter Posted December 19, 2011 Share Posted December 19, 2011 I had an old protected rights pension that protected the tax free lump sum and it turned out very well, as I was able to take about 60% of it as a tax free lump sum. I haven't got a clue how or why this was possible, as the norm is 25%. Link to comment Share on other sites More sharing options...
CliveH Posted December 19, 2011 Share Posted December 19, 2011 A good factsheet aimed at employers from the government should help - basically the old rules re how you had to take the PR benefits are being scrapped. http://www.dwp.gov.uk/docs/emp-contracting-out-factsheet.pdf One point I would mention is that I would recommend you consider a joint life annuity because if you are older than your wife the actuaries will assume you will die before her anyway and so your "life" will not be a factor in driving the annuity rate. BUT - tragedies do happen and in the event of your wife pre-deceasing you via some awful accident, why not have a joint life annuity if the annuity rate for a joint life one is not a lot different to a single life annuity on your wife’s annuity alone? Link to comment Share on other sites More sharing options...
CliveH Posted December 19, 2011 Share Posted December 19, 2011 [ QUOTE]peter - 2011-12-19 7:44 PM I had an old protected rights pension that protected the tax free lump sum and it turned out very well, as I was able to take about 60% of it as a tax free lump sum. I haven't got a clue how or why this was possible, as the norm is 25%. I doubt this was a Protected Rights pension as up until recently you could not take Tax Free Cash from the Protected Rights element of a pension. What it is most likely to be Peter, was an old style pension (that may have had an element or Protected Rights) that allowed the Tax Free Cash to be Calculated as 3n/80ths of Final salary where "n" equals number of years service. These are variously "Executive Pension Plans" (EPP's) - sometimes known as "Top Hat Schemes" were appropriate or COMPS and/or CIMPS (Contracted Out/In Money Purchase schemes) and if the fund was from a Transfer out a thing called the Section 32 Buy Out Bond. If we look at a worked example it worked like this - Fund of £100,000, Final Salary of £40,000, 40 years service. So 3n/80 of Final Salary 3 x 40 / 80 x £40,000 = 120/80 x £40,000 = 1.5 x £40,000 = £60,000 tax free cash - which in this case = 60% of the fund. However if the fund was £500,000, then the 3n/80ths rule dictates that only 12% Tax Free Cash would be available. So in this case, a transfer to a "New Style" plan that allows a flat 25% Tax Free Cash would be beneficial assuming Tax Free Cash is what is wanted. This 3n 80ths rule was often termed "protected Tax Free Cash" because it was a "protected" function of your final salary. It is not the same as Protected Rights which is the part of your pension accrued via National Insurance rebates where the rules on how you took the benefits were originally set up to reflect the same sort of restricted pension income you would get if you had remained contracted into SERPS and more latterly S2P. Link to comment Share on other sites More sharing options...
Guest peter Posted December 19, 2011 Share Posted December 19, 2011 That's strange, I was not contracted out of additional state pension, yet still had protected rights. How so?. Link to comment Share on other sites More sharing options...
CliveH Posted December 19, 2011 Share Posted December 19, 2011 If you were not contracted out of SERPS/S2P then it is most likely as I say - your pension was not a "Protected Rights Pension" - it was a pension where your Tax Free Cash was Protected as a function of your final salary. I would suggest that you are seeing the word "Protected" and simply assuming that Protected Rights and Protected Tax Free cash are one and the same - they are not. In fact they are very different. If you took your Tax Free Cash from a plan prior to "A-Day" - 6th April 2006 then I can definitely state that your pension was NOT a Protected Rights fund because prior to that, no one was allowed to take tax free cash from a PR pension. It was only after A Day that the rules changed at TFC was available from PR's funds within a pension. Link to comment Share on other sites More sharing options...
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