(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)
[PN4.7]
The administrator should monitor the funding of AVC accounts
at periodic intervals to ensure that excessive funds do not build
up and should arrange for contribution levels to be cut back where
necessary. Where the benefits are nonetheless found to be excessive
on the relevant date, the surplus funds to the extent to which they
represent excessive AVCs (whether paid under the employer's main
scheme (see
PSI4.3.8), a supplementary scheme (see
PSI4.3.10), or a free- standing AVC
scheme (see Section 4)) must be dealt with by giving the employee
(or his or her personal representatives where the employee has
died) a choice as to whether the surplus is to be repaid subject to
tax at a special rate (see
PSI17.2.47-49) or utilised
to provide further benefits within Inland Revenue approvable
limits.
The relevant date depends on whether or not some or all of
the voluntary contributions have been paid to a free-standing AVC
scheme. If so, the relevant date is the earliest of retirement,
leaving service or death. If not, on leaving pensionable service
the relevant date may be postponed until the earlier of a transfer
out of the member’s benefits or their coming into payment.
The Retirement Benefits Schemes (Restriction on Discretion to
Approve) (Additional Voluntary Contributions) Regulations 1993 [SI
1993 No. 3016] set out the precise rules for calculating such a
surplus and PN 16.12 to 16.17 set out the administrative
arrangements.
Note that where a member draws AVC benefits either earlier or
later than the employer funded benefits (see PSI Part 25 Section 3)
the surplus check takes place when the employer funded benefits
come into payment. If the member dies prior to taking an AVC
pension, but after employer funded benefits have commenced there
will be a second statutory surplus test under the Retirement
Benefits Schemes (Restriction on Discretion to Approve)(Additional
Voluntary Contributions) Regulations 1993 [SI 1993 No 3016}] - see
PSI25.3.12.
