The government is going to allow protected rights benefits from State Second Pensions (SSP) to be invested into Sipps from October the Minister for Pensions Reform Mike O'Brien announced today (27 June).
At present individuals cannot transfer their pot of protected rights into a Sipp.
The Department for Work and Pensions (DWP) said the move would allow investors to have more choice following changes to pensions rules allowing protected rights to be held in Sipps.
The DWP said existing restrictions preventing Sipps from holding protected rights are now considered unnecessary following changes which brought all personal pensions under the Financial Services Authority's (FSA's) regulation from April 2007.
O'Brien said: "These changes will give more flexibility and investment choice to people taking an active interest in the management of their pension fund.
"It will also be easier for individuals to transfer funds between different types of pension schemes, and to consolidate pension rights in one place."
Meanwhile, Rachel Vahey, head of pensions development at Aegon, said: "Allowing the self-investment of protected rights removes an anomaly that did more to confuse people than help them plan for retirement.
"But it is disappointing that the DWP isn't prepared to go a little bit further and remove all the differences between protected rights and non-protected rights now rather than wait until 2012.
"Removing the restriction to provide a spouse's pension would simplify pensions greatly and mean people could use all their pension pot to buy the right type of annuity to suit their retirement income needs."