PSI6.5.71 - Total Benefits on Retirement at Normal Retirement Age: Maximum Total Benefits - Continuous Service on Change of Employer

(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)

[PN 7.15 – 21 and 21.4]

It is a general principle that an employer may only provide benefits in respect of service with that employer. But when a member leaves the service of one employer and enters the service of another, service may be treated as continuous for the purpose of calculating the benefits provided by the second employer if

1. the employers are associated (see PSI6.5.72)
or
2. a business has been taken over, merged, demerged or reconstructed and the member’s position before and after the change is essentially unchanged (see PSI6 5.73)
and
3. neither of the Provisos below applies
and
4. where the member is a controlling director of one or both employers he or she must obtain our prior agreement to continuous service treatment. See Claim Procedure below.

Provisos: continuous service will not be allowed where: -

• The member is employed concurrently by both employers at any time. For continuous service purposes, service includes

a. any period of employment with the employer in any capacity with remuneration assessable under Schedule E
b. any period as a director of the employer even if the member received no remuneration for these duties
c. any period as an officer of the company, e.g. company secretary, even if the member received no remuneration for these duties
d. any period in which the member took part in the management of the affairs of the employer even if the member received no remuneration for these duties
The above periods include any period when the employer was not trading; any period when the employer was dormant; and any period when the employer was in the hands of a liquidator, administrator, administrative receiver or receiver.

• There is a gap of more than three months between the end of the old employment and the start of the new.

Claim Procedure: where the member is a controlling director of one or both employers: -

• He or she must complete and submit the form PS 155 and the claim must be made within six years of leaving the old employer.
• One claim covers every scheme of the new employer to which the member belongs. Every scheme of the new employer must provide benefits on the same basis. So if the claim is agreed the member must tell the administrator/trustees of all schemes of the new employer to which he or she belongs at any time that he or she is entitled to continuous service. The member should not make a new claim if he or she joins another scheme of the new employer.
• A claim covers only one change of employer. A separate claim must be made for each change of employer.

If continuous service is allowed, the following will apply: -

• Benefits from the new employer will be based on the total length of service with the two employers.
• Benefits from the scheme or schemes of the old employer will not treated as retained benefits. For the purposes of the Revenue limits they will be treated as aggregable benefits in the same way as benefits from other schemes of the new employer (see PSI6.1.4).
• The relevant date for the purpose of determining final remuneration will be the date of retirement from, leaving the pensionable service of, or death whilst in the service of, the new employer. This means that final remuneration will normally be based on remuneration from the new employer. It may also be based wholly or in part on remuneration from the old employer if the rules of the new employer’s scheme permit.