Protected Rights Benefits

Protected Rights are a type of pension fund. They are built up by money coming in from the Government for those of you who have in the past or still are “contracted out” of the State Second Pension, or now commonly known as S2P.

Before that, it was called SERPS. In 1988, it became possible for the first time for individuals to opt out of the Government's additional pension, or SERPS, scheme. It works like this; - instead of the Government taking all of your National Insurance contributions and crediting you with a SERPS or S2P pension in addition to the Basic State Pension for when you retire, you get to redirect that part of your National Insurance contribution back to your own private pension and invest it in your own pension plan. Typically, either into your company pension scheme or your own Personal Pension (also known as a PP). So you're actually doing your own thing instead of taking the Government's promise of a pension for when you retire.

Other differences

Tax free cash is the main one. When you receive your additional pension from the Government when you retire, it comes as a pension only. With a Personal Pension, when you “retire” your fund (you don't actually have to stop working to do this), you can take 25% of the fund value as tax free cash. The main words in that sentence are “tax free”.

How long can this go on for?

Contracting out is to be withdrawn by the Government in 2012. This means that, rightly or wrongly for you, you can continue to contract out of the State's Second Pension, or S2P, until then. Even if you have already gone back into the State scheme, you could still have a pension fund that has Protected Rights in it, meaning you'll have a fund that can now invest in these previously disallowed funds.

So what to do now?

Well, there are now thousands of funds, as well as commercial property for example, amongst other investments that protected rights funds can now be invested in. You can now combine Protected Rights with your other pension funds and invest them as one fund.

The best way to investigate your possibilities is to discuss your options with an Independent Financial Adviser. Not only can they describe what options are open to you, but they can use whichever SIPP is most appropriate for you in the market. There are quite a few available and so you'll get a choice of more than one SIPP as opposed to what you may get from other tied advisers, such as Banks. Some tied advisers don't even have a SIPP.

So, you'll get a better choice and flexibility when taking an income for retirement, you could reduce the charges compared to where you currently have your protected rights money held in separate policies, your money can be freely invested in the full range of options available including access to previously unavailable investments such as directly into commercial property purchase.

This means you can manage all of your pension funds in a single portfolio and take greater control of its overall investment strategy. Remember, you can be as adventurous or as cautious as you like with your investments. These funds don't necessarily have to come with additional or high risk investments.