Stand-out Q – GMP rights to a SIPP…


SAT, 24 MAR 2018

Our Technical Hub provides access to a wide range of pension tax and trust technical resources. Every now and then we post tweets covering stand out questions from our technical content and our answers in case others might also find them helpful. As Twitter’s character restrictions only allow for the bare bones of the Q&A we link to the details here, too.


Is it possible to transfer guaranteed minimum pension (GMP) rights to a SIPP?


Contracting out on a money purchase basis was abolished in 2012. Therefore a SIPP is not capable of holding contracting out rights. Regulation 6 of SI 2011/1245 provides that from 6 April 2012 transfers can be made from contracted out DB schemes to non contracted out schemes provided certain safeguards are met. These safeguards are that:

• The transferring member consents to the transfer in writing, and

• The transferring member has acknowledged in writing to the transferring scheme that he has received a statement from the receiving scheme showing the benefits to be awarded in respect of the transfer payment, and he accepts that –

– The benefits to be provided by the receiving scheme may be in a different form and of a different amount to those which would have been payable by the transferring scheme, and

– There is no statutory requirement on the receiving scheme to provide for survivor’s benefits out of the transfer payment.

Where any part of the transfer payment relates to GMP benefits, the transfer payment (whether or not it forms part of a larger payment in respect of both guaranteed minimum pensions and other rights) is of an amount at least equal to the cash equivalent of the earner’s accrued rights to GMP.

In addition the Pension Schemes Act 2015 introduced a requirement that where the amount to be transferred is greater than £30,000 the scheme trustees/managers check that members have received the appropriate independent advice before processing transfers from defined benefit arrangements to money purchase arrangements to access the new pension freedoms available from 6 April 2015.

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