Flexible benefits vs safeguarded benefits

The following Pensions practice note provides comprehensive and up to date legal information covering:

  • Flexible benefits vs safeguarded benefits
  • Why does the distinction matter?
  • What are flexible benefits?
  • The legal definition
  • Pension benefits that have been confirmed to be flexible benefits
  • What are safeguarded benefits?
  • Legal definition
  • Pension benefits that have been confirmed to be safeguarded benefits
  • What are 'safeguarded-flexible benefits'?
  • Uncertainties
  • More...

Flexible benefits vs safeguarded benefits

This Practice Note focuses on the meanings of 'flexible benefit', 'safeguarded benefit' and ‘safeguarded-flexible benefit’ for the purpose of the pension freedoms introduced on 6 April 2015 (for further information on which, see Practice Note: Pension freedoms—an introduction).

Why does the distinction matter?

It is important to distinguish between flexible benefits and safeguarded benefits because the pension freedoms introduced on 6 April 2015 apply to the former but not the latter. In other words, an individual with only safeguarded benefits will not be able to take advantage of the pension freedoms, at least not without taking steps to transform their safeguarded benefits into flexible benefits (eg by transferring them out into flexible benefit schemes or converting them into flexible benefits).

The government had originally contemplated the idea of consulting on proposals to extend some pension freedoms to safeguarded benefits, however there has been radio silence on this idea since it was first announced in July 2014. In any event, schemes with safeguarded benefits would have been expected to reject such proposals due to the administration and actuarial difficulties that the scheme would have faced every time a member exercised a pension freedom (eg every time they took out a cash sum).

The appeal of the pension freedoms (in particular the ability to take one's pension pot in one or more cash sums) has led

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