HD SIPP is able to accept Protected Rights
The HD SIPP accepts Protected Rights (PR) benfit transfers from another provider independently or we can co-ordinate the transfer with your main (non-PR) benefits. Very few SIPP's are able to do this.
What are Protected Rights & GMPs?
When the State earnings-related Pension Scheme ('SERPS') was introduced in 1978, the Government decided to allow employers to contract-out of it, provided contributions were instead paid to a suitable private arrangement.
In order to contract out Final Salary Schemes (FS Schemes) originally had to provide a Guaranteed Minimum Pension (GMP) broadly equivalent to the SERPS entitlement being given up. As from 6th April 1997 FS Schemes wanting to contract out had to pass a new test called the Reference Scheme test which aimed to ensure that a certain overall level of benefits had to be provided for members of the scheme generally. Members of contracted-out FS Schemes ceased accruing GMPs on 5th April 1997 but GMPs are retained in respect of service completed before that date.
The original aim of the GMP legislation was to ensure that on retirement a member was entitled to a pension which was at least equal to what he/she would have received from SERPS (now the State 2nd Pension, or S2P). However this ideal has been somewhat diluted and with many Final Salary schemes unable to meet their liabilities, largely due to the spiralling cost of annuities, the availability of a full replacement pension for SERPS is far less of a certainty.
At first only final-salary occupational schemes were allowed to contract out of SERPS , but in 1988 money purchase schemes, including personal pension schemes, were also allowed to do so by putting money into separate funds known as "Protected Rights". On retirement the Protected Rights "pot" must provide benefits on a pre-determined basis, the actual amount depending on the amount of money available and the cost of annuities at the time. Unlike GMP's, Protected Rights make no attempt to guarantee a particular level of benefit.
To further promote contracting out, the DSS (now DWP) paid an 'incentive' of 2% of earnings between the upper and lower earnings limit towards contracted-out money purchase arrangements. This stopped in April 1993, though from 6th April 97 age-related rebates became payable in addition to the flat rate contracted-out rebate.
High annuity costs combined with generally lower rates of growth now make it harder for Protected Rights to "beat" SERPS, and if you are still contracted-out you should seek advice as to whether this is a good thing. If you now want to contract back in you need form CA1543, available from your existing provider or we can obtain it from the Inland Revenue for you.
How do I access my Protected Rights?
Dependent upon your circumstances, you may have a GMP - please see previous section: "What are Protected Rights & GMPs?" - in an employer's Final Salary scheme or it may have been bought out with an Insurance Company in what is known as a Section 32 Policy. Either way the intention will be to provide a pension to replace the SERPS entitlement being given up, subject to the scheme or policy being sufficiently funded.Alternatively you could have a Personal Pension and be contracted out via an "Appropriate Pension Policy" containing your Protected Rights, or you may have been in an employer's Contracted Out Money Purchase Scheme (or "COMP"). On retirement your Protected Rights "pot" can buy an annuity, and the actual pension will depend on the amount of the fund and the cost of annuities.
The HD SIPP accepts Protected Rights (PR) benfit transfers from another provider independently or we can co-ordinate the transfer with your main (non-PR) benefits.
New legislation introduiced in October 2008 allows investment flexibility for your Protected Rights — never previously allowed by HM Revenue & Customs.
When you retire you can still buy an annuity if you wish, but you may also opt for "Income Drawdown" which leaves your capital invested and allows you to receive a flexible income to suit you (within HMRC limits).
