Axing protected rights

From 6th April 2012, protected rights will no longer exist and the special rules currently applied to these pension benefits will effectively be axed.

This means that protected rights will essentially be treated in the same way that non-protected rights pension benefits are treated today.

The requirement to impose a 50% spouses’ entitlement will go, as will restrictions on lump sum death benefits and the need to apply unisex annuity rates.

Of course unisex annuity rates will then apply to all pension benefits from 21st December 2012 when the European Court of Justice ruling on gender inequality comes into force. This presents a short window of opportunity for some of those with protected rights in their pension funds to secure an annuity on more favourable terms.

One impact of these technical changes is the requirement to update death benefit nominations.

We understand that from 6th April, any nomination that has already been made about who should receive lump sum benefits from protected rights funds will no longer have any effect.

Investors with protected rights funds should therefore consider submitting an updated nomination form to their pension provider on 6th April, to ensure the trustees responsible for distributing any pension benefits on death will consider the correct instruction.

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