I have received some pension documents saying that I have a protected rights pension, what is this and what should I do?
- Andrew Jenkinson
You may have a protected rights pension if you previously contracted out of the State Earnings Related Pension Scheme (SERPS) or the Second State pension. If you did this, the national insurance contributions you would have paid into either of these schemes, along with tax relief, will have been redirected into a personal pension instead.
Protected or Non-Protected Rights
Previously there used to be differences between how you could take your protected rights and non-protected rights benefits. However, since 6 April 2012, when contracting out finished, protected rights and non-protected rights have been treated the same. This means that your protected rights pension is now the same as any other defined contribution pension.
Protected Rights and Pension Freedom
Under new pension freedoms introduced in April 2015, you can therefore access your protected rights pension from the age of 55 if you want to. Remember, however, that if you want to take your protected rights pension as a lump sum, only the first 25% will be tax-free, and the rest will be taxed at your marginal rate of Income Tax.