TECHNICAL TALK
Safeguarded benefit
Final Salary / Defined Benefit schemes .
Guaranteed Annuity Rates regardless of whether these are lower than rates available on the open market .
Guaranteed level of pension income e . g . under a RAC or deferred annuity .
Guaranteed Minimum Pension ( GMP ) benefits .
Section 9 2 ( b ) rights i . e ., contracted out pension service post 1997 under a scheme that contracts out on the Reference Scheme Test basis .
Pension plans set up to provide compensation following the pension review in the late 1980s and early 1990s .
Not a safeguarded benefit
Any promise or guarantee relating to investment growth or future fund values .
A policy which used to contain a Guaranteed annuity rate which has since expired e . g ., ceased to apply at a certain age and the client is now past this point .
Guaranteed lump sums offering no guarantees on income i . e ., lump sums payable on death .
Guaranteed investment returns or growth rates on accumulation plans e . g ., with profits guaranteed bonus rates .
Cash balance arrangements .
The right to a protected higher tax-free cash lump sum amount ( PCLS ).
Drawdown income guarantees e . g ., a specific level of income will always be paid from the drawdown plan .
So , what does this mean ? Firms must hold full pension transfer permissions to carry out :
• Transfer from a DB occupational pension scheme into a new money purchase scheme / Flexi-access Drawdown
• Transfer from a DC occupational scheme that holds safeguarded benefits i . e . Section 32 containing GMP
Firms must hold limited pension transfer permissions to carry out :
• Transfers from an Individual or Occupational DC pension with a GAR ( including RAC with minimum income guarantee ).
No special permissions are required to transact :
• Individual or Occupational DC pension with no safeguarded benefits .
• DB Short service leaver refunds ( where remaining in the scheme is not an option ).
• Pension Sharing Orders ( where remaining in the scheme is not an option ).
To further discuss the information covered in this article , or any other aspect of pensions technical support , please get in touch on 01484 439126 .
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