In trying to understand the mechanics of the protection system, it is important to remember that there is one element linked to the design of the pension scheme, and one linked to a client’s membership of a scheme.
The scheme-linked condition is that the pension offered a right to access benefits from age 55 on February 11 2021.
The legislation just refers to an “actual or prospective right”, which makes it sound as though most schemes would qualify.
However, HM Revenue & Customs’ expectation is that this right was ‘unqualified’, meaning that benefits could be accessed without needing any approval from trustees or managers of the scheme.
That severely curtails the number of schemes that meet the condition because the rules of many schemes give the trustees or manager the right, even where rarely if ever used, to veto a decision by the member to take benefits.
This power can be helpful where there are suspicions that the member might be a victim of a pension scam.
In terms of establishing whether this unqualified right exists, the best bet is to ask the administrator of the scheme.
Membership-based condition
Moving on to the membership-based condition, in order to benefit from protection your client needed to have been a member of a scheme that met the scheme-linked condition by November 3 2021 or, if they were not a member by November 3, had requested a transfer to one of those schemes by that date.
The key point to understand is that, even if a scheme qualifies as offering a protected pension age of 55, if your client did not meet either of the above membership or transfer conditions, they would not be able to access benefits before 57 in that scheme.
This becomes important when we come to look at the greater complexities surrounding transfers between schemes where a protected pension age of 55 is held, and those where it is not.
This is the main area where the rules have an immediate impact because consideration needs to be given to how transfers are structured and the impact this does or does not have on the ability to access benefits from a different age in the receiving scheme.
Transfers from a protected (NMPA 55) scheme to an unprotected (NMPA 57) scheme
Let us start with the good news here.
Based solely on the legislation, if you transfer benefits from an NMPA 55 scheme to an NMPA 57 scheme, it is not possible to lose the right to an NMPA of 55 on the transferred benefits.
