2/2/2012
Second State Pension – “SP2”
End of “Contracted-out Personal Pensions” and “Protected Rights”
The Government is abolishing contracting out of the state second pension scheme into personal pensions (and all money purchase schemes) from 6 April 2012.
Protected Rights.
What are Protected Rights? Some types of pension benefit are currently referred to as ‘Protected Rights’ which are a type of benefit usually built up from rebates that may have been received from the Government as an alternative to part of additional state pension provisions.
At the moment, benefits paid under Protected Rights can be more restrictive than ordinary (or “Non-Protected Rights”). These changes could therefore provide more flexibility on how they can take these pension benefits can be taken.
The benefits can be paid according to the underlying pension scheme’s rules. For example, it is no longer necessary to have to calculate an annuity using unisex rates or include a spouse’s pension. This may have the effect of improving the pension annuity rate in respect of men and worsening those for women.
Not everyone will have Protected Rights benefits as it will depend on the choices you may have made in relation to your pensions over the years. Protected Rights will be treated in the same way as other pension benefits from 6 April 2012.
People may not have to need to take any action in relation to these changes but it is sensible to review any provisions now so as to be aware of how the changes might affect them.
It is also a sensible idea to review what sort of nominations you have already made regarding the payment of benefits or lump sums payable the event of your death.
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