The complexity involved in a block transfer will vary from scheme to scheme. Many are well-equipped to process block transfers and support them regularly. It is important to check with the transferring scheme administrator whether they will facilitate a block transfer, even if all of the three conditions are met.
Multiple scheme-specific lump sums
Care should be taken where the member has scheme-specific lump sum protection under more than one scheme.
Protection is retained through a block transfer by treating the receiving scheme as if it were the original protected scheme. While that is fine where only one scheme is being transferred, if the member consolidates all their pension rights only the protection in respect of the first block transfer will be retained.
Protected pension ages
A protected pension age applies to all rights held in a scheme, up to the point of crystallisation. This means that following a block transfer of uncrystallised funds with a protected pension age, the member could make additional contributions or transfer in further uncrystallised funds that would all be able to benefit from the same protection.
Once the member has crystallised, any new contributions or transfers subsequently added to the scheme can only be accessed from the NMPA.
A further point to note is that if a member is transferring a pension that they already crystallised early using a protected pension age, they can transfer to another scheme and continue receiving income without having to complete a block transfer.
In other words, the right to a protected pension age is locked in at the moment a member takes benefits. This was not always the case; before April 6 2015, if the member wanted to switch schemes they had to continue doing block transfers in order to keep withdrawing income before the NMPA.
2028 NMPA increase
We have known since 2014 that the NMPA is increasing from age 55 to 57 in April 2028. However, it is worth noting that anyone who already has a protected pension age under previous rules still retains this and the normal block transfer conditions continue to apply to them.
But a new protection regime has been introduced to allow some individuals to retain access to their benefits from age 55, provided they and their scheme can meet certain requirements.
These individuals can individually transfer to another – ‘age 57’ – scheme and keep the earlier protected age for the transferred benefits only (in other words, not for new contributions to the new scheme or any benefits that were already in the new scheme).
