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Protected rights policies 
Millions of pension savers who have accumulated funds worth as much as £100bn by opting out of the state second pension could be set to enjoy greater freedoms over how they can invest their money.The Government recently revealed plans to relax the rules governing the investment of so-called protected rights policies. These policies are built up via rebates awarded to workers who have sacrificed a guaranteed state-backed ‘top-up’ pension benefit in return for annual lump sums that they can invest themselves. To date, protected rights funds have been subject to strict rules as to how they can be invested and what benefits can be taken. But the new plans could give investors greater investment flexibility and simplify the process of taking benefits. One significant change is that investors may be able to transfer their protected rights funds into self-invested personal pensions (SIPPs), which was not previously allowed. The new rules would also abolish the obligation for married policyholders to use their protected rights funds to buy an annuity that would pay out half the income to their spouse if they died early. Purchasing these spouses’ annuities could significantly cut the level of income. Pension savers have been able to contract out of the earnings-linked state second pension – or S2P – since 1988. One reason for doing so has been the belief that the Government would fail to meet its promise of a guaranteed pension income. If you require any further information about the services that we provide or would like to review your financial planning position, please contact us |