Keeping PPIAs on transfer - the rules
When the anti-forestalling rules were introduced the Government promised to look at the issue of keeping protected pension input amounts under new arrangements again. They’ve now done this.
What you can and can't do
- Transfer an existing personal pension or stakeholder plan to a new individual plan or pension provider.
- Stop paying into one arrangement and start paying into another. The old plan value doesn’t need to be transferred.
- Transfer an occupational pension scheme or GPP to a new scheme or provider.
These are all allowed and keep the PPIA provided the conditions are met.
- Transfer to a new individual arrangement if a member of an occupational pension scheme or GPP and keep any PPIA. It has to be the whole scheme.
- Transfer individual plans within the same scheme and keep the PPIA. This rules out transfers within personal pension schemes.
- Change scheme or provider more than once if it’s an individual plan.
- Transfer an individual plan to an existing arrangement. The new plan has to be a new arrangement.
- Transfer an occupational pension scheme or GPP to a new scheme or provider and change the contribution or accrual basis.
Why the Government had to look at this again
The initial rules stated that some payments that continued to be paid at least quarterly, since before 22 April 2009 and some pension saving set up on or after 22 April 2009 would not be subject to the special annual allowance charge. However, these protected pension input amounts (PPIAs), as they’re affectionately known, would be lost if they were paid to anything other than the original arrangement. This effectively ruled out transfers for those with PPIAs. There was an exception for existing occupational pension schemes or GPPs that were closing and where the new arrangement was for at least 20 members.
‘The Special Annual Allowance Charge (Protected Pension Input Amounts) Order 2010 introduces three more scenarios that will be treated as PPIAs or continue as PPIAs.
- Where there’s a change of provider or pension scheme on or after 22 April 2009.
- Where a contractual commitment to pay contributions at a certain level was agreed in writing on or before 22 April 2009 but contributions didn’t actually start until after 22 April 2009.
- A lump sum paid on 22 April 2009.
As ever though, there are certain conditions that need to be met to retain the protection on transfer. The key conditions are:
- the existing arrangement was in place on or before 22 April 2009,
- the new arrangement must be started within three months of the old arrangement ending,
- payments must be paid at least quarterly,
- for individual arrangements, for example personal pension plans or stakeholders, there’s only one chance to keep the PPIA under a new arrangement,
- contributions to money purchase arrangements can’t be greater under the new arrangement than they were under the old arrangement,
- for defined benefit schemes, there must be no material difference between benefits under the old and new arrangements,
- and for occupational pension schemes and GPPs the change must be due to the employer restructuring its pension arrangements or a ‘relevant business transfer’.
It’s worth noting that the value of the old arrangement doesn’t have to transfer to the new arrangement. A PPIA can be kept by just stopping payments to the old arrangement and starting them under a new arrangement.
Next page: What you can do for high-income clients
Note - The information provided is based on our current understanding of the Budget 2009 and Pre-Budget Report 2009, associated documents and regulations, and may be subject to alteration as a result of changes in legislation or practice.
Published 9 March 2010