Protected rights arise from contracting-out of the State Second Pension, formally State Earnings Related Pension Scheme (SERPS). Individuals and schemes can contract-out in a number of ways.

Contracted-out money purchase pension schemes
Both the employer's and the individual member's NI contributions are reduced with the difference being diverted into the protected rights fund.

Appropriate Personal Pensions
Minimum contributions from the government, based on the NI contribution and income tax relief on the individual's share of the rebate, are invested as an individual's protected rights.

Contracted out defined benefits scheme
Benefits are not classed as protected rights until transfer to a personal pension or money purchase scheme, but as section 9(2B) rights or guaranteed minimum pension (GMP).

The GMP entitlement is derived from membership of a contracted out final salary scheme between 1978 and 6 April 1997 and following that section 9(2B) rights are accrued. Employer and employee NI contributions are also reduced and the difference is used to fund benefits.