PSI6.5.51 - Total Benefits on Retirement at Normal Retirement Age: Maximum Total Benefits - Retained Benefits - Disregard

(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)

[Memorandum No 108]

[PN 7.4, 7.29 and 7.30]

For all new members (including those with continued rights) joining schemes on or after 31 August 1991, retained benefits do not have to be taken into account in calculating maximum total benefits provided that:-

1. the member is not, and has not been in the 10 years prior to joining the scheme, a controlling director in respect of the employment being pensioned, and
2. the member’s remuneration in the first year’s employment following entry to the scheme does not exceed 1/4 of the permitted maximum determined at its level on entry.

So in relation to b. for a member joining a scheme in 1995/96 the threshold is £19,650 (1/4 of £78,600 (see PSI6.4.8)). Except where it is clear from the outset that earnings exceed the threshold, the check should take place 12 months or so after the member joins the scheme. Schemes providing benefits on an accelerated accrual basis may therefore wish to qualify any benefit promises given on joining. Where an employee is, or has been, a member of more than one scheme of the employer, it is the date of entry to the first of those schemes which counts for this test.