Contracting-out on a protected rights basis was abolished with effect from 6 April 2012. But references to Protected Rights Rules were hard-coded into many schemes' rules which means these references will survive past 6 April 2012 unless the rules are amended.
If you do not change your rules before 6 April 2018 under the special statutory power then you are likely to be unable to do so because of other statutory restrictions on amendment. The power is exercised by the trustees by resolution.
Why remove the Protected Rights Rules?
The Protected Rights Rules required schemes to meet certain conditions regarding protected rights. For example, protected rights had to be used to provide a spouse's pension when the member retired if he or she was married or had a civil partner (even if the member did not want a spouse's pension from other scheme benefits). Other restrictions applied to early retirement, commuting protected rights for tax free cash at retirement or for triviality, refunds for less than two years' qualifying service and transfers-out. If these restrictions are removed, then schemes will be able to treat former protected rights in line with other scheme benefits, making scheme administration easier, reducing costs and giving more flexibility to members.
Trustees should review their scheme rules without delay to check whether Protected Rights Rules are hard-coded, whether any action has been taken to remove these Rules and if not consider passing a resolution before 6 April 2018 to remove them.