Protected rights pension funds can now tranfser to SIPPs

by Gill Montia

Story link: Protected rights pension funds can now tranfser to SIPPs

Providers of Self-Invested Pension plans (SIPPs) are expecting strong inflows following changes in pension regulations that took effect on 1st October, allowing people with protected pension rights pension pots to transfer their funds into a SIPP.

Around six million people who, from 1998, opted out of the state second pension scheme (previously known as SERPS) have accrued protected rights funds in private pension schemes.

Under the old regime, protected rights funds were regarded as part of the state pension because they are built up through rebates in National Insurance Contributions.

The Government therefore insisted that the monies in protected rights funds should be invested cautiously, putting SIPPs off limits because they offer access to a wide variety of assets such as unit trusts, equities and commercial property.

However, the Financial Services Authority took over the regulation of SIPPs in 2007 and in June of this year, the Department for Work and Pensions announced that protected rights funds could be invested in SIPPs from October.

Protected rights funds held in SIPPs must separately identified from other funds and the existing rules governing how the benefits can be taken are unchanged.

Analysts estimate that between £70 billion and £100 billion is held in protected rights funds; those who are unsure whether they are contracted out of the second state pension can check with HM Revenue & Customs.