What are Protected Rights Investments ?
Protected rights investments is a type of pension fund, which could be part of your personal pension or your employer sponsored scheme. It relates to those people who have, for however long, “contracted out” of either of the state top-up schemes whether this be the State Earnings Related Pension Scheme (SERPS), or its replacement the State Second Pension (S2P).
Contracting out was promoted heavily during the late 1980s and 1990s by the Government that offered additional incentive payments to those who gave up part of their entitlement to the additional state scheme.
Incentive payments would be payable to the investor’s chosen private pension for as long as they remained contracted out. Many investors holding protected rights investments have since been advised to contract back into the State scheme which is perceived to offer better value now that the incentive payments payable by the Government have reduced significantly.
This means that many people at retirement will receive a pension income based on both protected rights investments earned when they were contracted out plus entitlement from SERPS and/or S2P.