Innes Reid Investments Limited

From the 6^th April 2012 it will no longer be necessary for money purchase pension schemes to recognise Protected Rights funds as separate benefits. In future, all funds will be consolidated and treated in the same way.

So what does this change mean for clients?

State Second Pension (S2P): Contracting out will end.  Clients who were previously contracted-out will automatically be contracted back into to S2P from 6^th April 2012 onwards, and no further rebates will be paid into their pension plan. Instead they will start to build up S2P benefit within the state scheme.  Rebates received in previous tax years will remain invested in the pension plan, and will have to be managed effectively in the same way as all money purchase pension benefits.

Retirement options: In future both Protected Rights and Non Protected Rights built up within a money purchase pension arrangement will be payable on retirement in the same way. In the past restrictions applied to Protected Rights annuities, and in certain situations restricted tax-free cash.

The changes include the removal (for the time being) of unisex annuity rates, the option to increase the Guarantee period, and increased protection for dependants.

Annuities: Clients currently considering buying an annuity with their Protected Rights funds may wish to delay doing so until the changes come into effect. Consolidating all their pension savings could result in higher annuity rates and a wider choice of annuity options being available.

Death benefit: From April this can be paid as a lump sum regardless of marital status. Previously, any Protected Rights had to be paid as a dependant's income.

In short, the changes to Protected Rights and the EU driven introduction of unisex annuity rates from 31^st December 2012 means that that the timing and planning of your retirement has never been more important.

If you have any queries about the impact of the abolition of Protected Rights or the best time to take your retirement benefits, please do not hesitate to contact Innes Reid for further assistance on 01244 347 583.