RPSM12200035 - Member Pages: Information Requirements and Administration: Recycling of Pension Commencement Lump Sum

Recycling of Pension Commencement Lump Sum

Do I need to tell my scheme administrator about this?

If you recycle your pension commencement lump sum then you or your representative must notify the scheme administrator in accordance with the requirements of Regulation 11A of the Registered Pension Schemes (Provision of Information) Regulations 2006 (as inserted by Regulation 4 of the Registered Pension Schemes (Provision of Information) (Amendment) Regulations 2006 [SI 2006/1961]).

When do I have to notify the scheme administrator about recycling?

A scheme member who intends to take a pension commencement lump sum as part of a recycling device will be required to inform the scheme administrator of that fact if the lump sum is deemed to be an unauthorised payment under the recycling rules. The notification must be given within 30 days of the date of the deemed unauthorised payment when that date is on or after 11 August 2006.

When you take the following steps:

• decide to use a pension commencement lump sum as the means to increase contributions significantly to a registered pension scheme, and then
• receive the lump sum, and then
• pay the significantly increased contributions

the deemed unauthorised payment occurs when the significantly greater contributions are paid.

Alternatively, when you take these steps:

• decide to use a pension commencement lump sum as the means to increase contributions significantly to a registered pension scheme, and then
• pay the significantly increased contributions or otherwise arrange for them to be paid, and then
• receive the lump sum,

the deemed unauthorised payment occurs when the lump sum is paid.

More information about when a pension commencement lump sum is deemed to be an unauthorised payment under the recycling rules and the tax consequences can be found at RPSM04104900.

What information must be included in the notification to the scheme administrator?

The member must inform the scheme administrator of the date that the pension commencement lump sum has been treated as unauthorised payment and the amount treated as the unauthorised payment.

What happens if I fail to notify the scheme administrator or provide them with incorrect information?

If you fail to notify the scheme administrator within the required 30 day period you could be liable for a penalty of up to £300. Further penalties of up to £60 a day could become payable for as long as the notification to the administrator remains outstanding.

Incorrect information, or omitting information from the notification that should be contained in it, could result in a penalty of up to £3,000.

Do I have to provide any information to HMRC?

In addition to the information that you should provide to the scheme administrator you should also inform the HMRC of the payment. If you complete a self-assessment return then you should declare the deemed unauthorised payment in your self-assessment return. If you do not complete a self-assessment return then you should inform your local HMRC office so that they can either send you a self-assessment return to complete or arrange for the collection of the tax due in some other way, for example a coding adjustment.