Surrender and forfeiture of pension benefits
Produced in partnership with Wyn Derbyshire of gunnercooke LLP
Surrender and forfeiture of pension benefits

The following Pensions guidance note Produced in partnership with Wyn Derbyshire of gunnercooke LLP provides comprehensive and up to date legal information covering:

  • Surrender and forfeiture of pension benefits
  • The general rule against surrender—the inalienability rule
  • Clarification of the inalienability rule—IMG v German
  • Surrender of pension rights and pensionable pay caps—Bradbury v BBC
  • Exceptions to the inalienability rule—the Pensions Act 1995, ss 91(5)–(6)
  • Exceptions to the inalienability rule—the Forfeiture Regulations
  • The general rule against forfeiture
  • Exceptions to anti-forfeiture rule—non-contracted-out benefits
  • Exceptions to anti-forfeiture—section 9(2B) rights
  • Exceptions to anti-forfeiture—guaranteed minimum pensions (GMPs)
  • more

THIS PRACTICE NOTE APPLIES TO OCCUPATIONAL PENSION SCHEMES ONLY

This Practice Note considers the extent to which accrued pension rights under registered occupational pension schemes can be surrendered or forfeited.

The general rule against surrender—the inalienability rule

Under section 91(1) of the Pensions Act 1995 (PA 1995), a person’s entitlement in respect of accrued benefit rights under a registered occupational pension scheme cannot be assigned, commuted, surrendered or charged, and no lien or set-off can be exercised in respect of it. Furthermore, any agreement to effect any such thing is unenforceable. This rule is known as the inalienability rule.

In circumstances where the inalienability rule applies to prevent the assignment of pension rights, a court cannot make an order to the contrary; however, this does not prevent the making of attachment of earnings orders (under the Attachment of Earnings Act 1971) or income payment orders (pursuant to the Insolvency Act 1986).

Note that there is no equivalent legislation prohibiting surrender in respect of personal pension schemes.

Clarification of the inalienability rule—IMG v German

In the case IMG v German, the Court of Appeal clarified that the Pensions Act 1995, s 91 does not prevent parties from agreeing, or the court from approving or enforcing, genuine agreements intended to compromise disputed or doubtful claims to benefit rights under an occupational pension scheme.