PSI5.3.3 - Contributions By Employers: Special Contributions - Contribution Must Not be Excessive

(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)

An employer should not pay more money into a scheme than is needed to meet its liabilities; otherwise it will be over-funded. Special contributions must therefore be actuarially justified. There is a widely-held belief that our practice allows an employer, usually in the first year or whenever money is available, to make a special contribution equal to the ordinary annual contribution regardless of its effect on funding. This is not correct. We will permit a reserve to be held in certain circumstances (see PSI20.6.10) but otherwise you should challenge the payment if the reason for it is unacceptable or is simply not given.

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