Annuities Explained Protected Rights Annuities

Protected Rights Annuities

Does this apply to me?

Protected rights annuities apply to those people who have contracted out of a State Second Pension or a State Earnings Related Pension Scheme. If you have done so, and therefore placed your National Insurance rebates into a personal pension fund, you must use a part of those savings to buy a protected rights annuity.

If you are not sure whether you have contracted out of the State Second Pension, you should contact your pension provider to find out if you are eligible for this annuity.

What does it mean to have a protected rights annuity?

If you have this annuity, there are several things you should be aware of. Firstly, you have the choice of taking a level, or ‘standard’ annuity, or an escalating one. Level annuities pay out at the same amount every year, whilst an escalating annuity increases at an agreed rate each year. You can also choose to convert up to a quarter of the protected rights pension into a tax-free lump sum.

Thinking of Retiring Soon? Have a look at our Annuity Comparison Table


Those with spouses or civil partners who have a protected rights annuity must take out a joint-life annuity which pays out 50% of your partner’s pension.

As long as you are over 55 years old and your pension scheme allows it, you may take your protected rights pension at the same time as you start receiving your other pension (whether from employment or your own personal pension).

What else should I be aware of?

From 2008, the government began to allow protected rights pension holders to transfer those pensions into self-invested personal pensions. By merging and simplifying your pension plans, you might make life much easier for yourself. It means that you will be giving yourself more control over how your retirement savings are invested.

If you are considering contracting out of a Second State Pension, which will eventually lead you to purchasing a protected rights annuity, you should consult an advisor first. Some people may benefit far more from a personal pension plan, so it is wise to examine your financial situation first.

Related Articles

State Pension – Basics

Personal Pension

Pension Enquiry

Recent Annuity Trends

  • Recommend Us - With Google Plus One