Navigating block transfer rules

1. Two or more members must transfer together. All members involved in the block transfer must be transferring from the same transferring scheme to the same receiving scheme. There is no requirement for either member to have a scheme-specific protection, so any other member of the scheme can act as a buddy for the purpose of a block transfer.

A scheme cannot be compelled to make a block transfer.

This means block transfers are not usually possible for members of single-member schemes, such as retirement annuity contracts and deferred annuity contracts (including section 32 policies). The exception is where a single-member scheme is winding up and the member’s rights are used to purchase a deferred annuity contract. 

The rules for this were relaxed temporarily between March 19 2014 and April 6 2015 where the buddy requirement was waived, provided the member had also accessed all of their benefits under the receiving scheme at the same time by October 5 2015.

This allowed an individual to transfer on their own – and from a single-member scheme – to take advantage of the new pension freedoms while still retaining their protection. 

2. All sums and assets relating to those members must be transferred, and this must be done as a single transfer – there might be administrative reasons why the assets are not all transferred on the same day.

For example, in specie transfers will involve assets settling at different times and cash may only be transferred after all other assets have settled. It is also not uncommon for additional cash to be transferred at a later date following completion of a transfer, often due to receipt of dividends or interest from investments. 

The complexity involved in a block transfer will vary from scheme to scheme.

Fortunately, schemes can take a pragmatic approach. As long as the transfer completes in a reasonable timeframe and relates to a single instruction it will usually meet the block transfer condition. 

A partial transfer will not qualify as a block transfer, but it will not cause protection to be lost under the transferring scheme either. In the case of scheme-specific lump sums, however, a partial transfer would reduce the value of the lump sum payable.

3. None of the transferring members can have been a member of the receiving scheme for more than 12 months prior to the date of transfer.

Membership of a scheme includes pension credit members, beneficiary’s pensions, and pensioner or deferred members, as well as those who are actively building up benefits. However, note the later section about protected pension age of 55 plus in relation to this.