(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)
(This text has been withheld because of exemptions in the
Freedom of Information Act 2000)
[PN7.22]
[PN7.24]
Some schemes with a normal retirement age below State
Pensionable Age (SPA) give the members a larger pension up to SPA
and a reduced scheme pension thereafter. The idea is to keep the
pensioners’ aggregate income from the occupational and State
schemes roughly constant throughout retirement. For the purpose of
Revenue limits we look at the actuarial value of the reducing
pension to ensure that it does not exceed the actuarial value of
the maximum approvable level pension (ignoring cost of living
additions).
Example male employee whose maximum pension,
ignoring commutation, is 2/3rds x 12,000 = £8,000.
Normal retirement age: 60 State Pensionable Age: 65
A scheme pension of £9,000 per annum is paid for 5 years
up to age 65 and £7,000 per annum thereafter when his State
pension of £2,000 per annum becomes payable.
The actuary certifies that £9,000 per annum for 5 years
and £7,000 thereafter is actuarially equivalent to a level
life pension of £8,000 per annum. (Note that for the first 5
years the actual benefit paid exceeds 2/3rds of final
remuneration.)
