SIPP Admin - Death Benefits

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Protected Rights

Following changes in legislation, from 1 October 2008 it is possible transfer benefits which contain protected rights to IPM. Please note that IPM will not be able to accept on-going contracted rebates into the IPM Personal Pension Scheme.

What are protected rights?

Protected rights are benefits that have that accumulated as a result of contracting out of the State Second Pension (S2P), formally know as the State Earnings Related Pension Scheme (SERPS). These monies may have previously been paid by the HMRC National Insurance Contributions Office on your behalf into an appropriate personal pension, appropriate stakeholder scheme, contracted out money purchase scheme, contracted out money purchase stakeholder scheme or contracted out final salary schemes.

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How to transfer

For establishing a new SIPP with IPM please ensure that the protected rights box on section 6 of the application form is indicated accordingly and the expression of wish for protected rights form is completed (this can be found on our Downloads section)

For existing IPM clients, please see our protected rights transfer pack for further details. Again this can be found on our Downloads section.

Investing

From 1 October 2008 the restrictions concerning investing protected rights funds have been relaxed. Therefore protected rights monies can be fully self invested in the IPM SIPP in accordance with IPM’s normal investment stance.

Benefits

It is now possible to take benefits from protected rights monies in accordance with the rules on ordinary pension benefits. Please see the Benefits from SIPP section of our website for further information.

Please note it is not possible to enter alternatively secured pension with protected rights monies and alternative arrangements need to be made prior an individual reaching age 75.

Death Benefits

The way protected rights benefits are treated upon death differ to ordinary pension benefits. These differences are as follows:

if an individual is survived by a qualifying spouse or civil partner, he/she is entitled to a pension from the protected rights funds;

if there is no qualifying spouse or civil partner, the protected rights funds must be paid out as a lump sum in accordance with the individual’s directions, i.e. the directions are binding. If no directions are given, or they can not be followed, the funds will be paid to the estate

Please also note that any lump sum death benefit paid from the protected rights is not subject to trustee’s discretion, it is likely that it will be aggregated with the estate for inheritance tax purposes, i.e. there is a greater risk of IHT being payable. This is laid down in the legislation and is not within the control of the Scheme Trustee.

Charges

IPM will not make any additional charges for the transferring or on going administration of protected rights benefits. This will be covered by the annual administration fee.

How IPM administer protected rights

IPM offers our clients the ability to combine and invest protected and non-protected rights monies collectively. There will be no requirement to establish a separate SIPP and no additional costs incurred.

To offer the ability to invest all of the SIPP as one fund IPM needs to establish the initial split of the fund between protected rights and non-protected rights. This can only be determined if the value of the existing SIPP fund is known at the date of transfer of the protected rights. Therefore we will require a valuation of the SIPP to be provided by the appointed investment administrator at this time. If the fund split is not given, the protected rights fund will be held in cash until this is to hand.

The reason for this is that IPM is required by the Department of Work and Pensions and Her Majesty’s Revenue and Customs to identify which benefits in your SIPP are protected rights and report the value of these on an annual basis.

Alternatively, you can arrange for the two elements of your SIPP to be invested separately i.e. managed as two funds. Please advise IPM of this at the time the paperwork is submitted and we will ensure the necessary preparations are made.

I.P.M. SIPP Administration Limited, Cintel House, Watton Road, Ware, Hertfordshire SG12 0AD Tel 0845 130 3443 Fax 0845 230 3443
email info@ipm-pensions.co.uk I.P.M. SIPP Administration Limited is authorised and regulated by the Financial Services Authority.

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