(This archived guidance relates to HMRC discretionary
practice before the 6th April 2006. For current guidance on
Registered Pension Schemes see the Registered Pension Schemes
Manual)
A large self-administered scheme must not make loans to
scheme members which are either unsecured or secured on a member's
interest in the scheme. There is a basic objection to such loans
because a member's entitlement is to a non-assignable pension. It
also means that money intended for retirement is being taken during
service. Loans are, however, permitted where an asset, other than
the member's interest in the scheme, is pledged as security. An
example is a loan for a house purchase secured by a mortgage on the
property - a “pension mortgage”. Section 154 ICTA 88
taxes benefits from loans on preferential terms enjoyed by
directors and higher-paid employees. For this reason any case where
you know or suspect that the trustees are lending money to scheme
members should be referred to the Divisional Manager.
