RPSM04102026 - Technical Pages: Taxation: Authorised employer payments: Authorised surplus payments: Surplus solely on death of a member: Deceased members who were connected with the sponsoring employer

Deceased members who were connected with the sponsoring employer

[s177] [The Registered Pension Schemes (Authorised Surplus Payments) Regulations 2006 - SI 2006/574] 

There is a qualification where a registered pension scheme, that is an occupational pension scheme, makes a surplus payment to a sponsoring employer solely in respect of the death of a member (see RPSM04102025).

The qualification takes the form of additional conditions that must be met for the payment to be an authorised surplus payment.

One of those additional conditions is that the deceased member must not have been ‘connected’ with the sponsoring employer at the date of his or her death.

For this purpose a member is ‘connected’ to a sponsoring employer at the date of death where

• if the sponsoring employer is a partnership
• the member is ‘connected’ with a partner in the partnership, or
• ‘connected’ with a person who was a partner in the partnership at any time during the year preceding the member’s death

or

• if the sponsoring employer is a company
• the member is, at the date of death, a ‘controlling director’ of the company, or
• was a ‘controlling director’ of the company at any time in the year preceding the member’s death, or
• the member is ‘connected’ with a person who is a ‘controlling director’ of the company at the date of the member’s death, or
• was a ‘controlling director’ of the company at any time during the year preceding the member’s death.

Whether a person is ‘connected’ with another person is determined in accordance with section 839(2) of the Income and Corporation Taxes Act 1988.

A ‘controlling director’ is a director to whom section 417(5)(b) of the Income and Corporation Taxes Act 1988 applies (as read with sections (3), (4) and (6) of that same section 417).