PSI6.5.93 - Total Benefits On Retirement At Normal Retirement Age: Maximum Total Benefits – Pension Sharing on Divorce – Pension Debits and Paying Benefits

(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)

When a pension debit must be taken into account at the employee’s normal retirement age for Revenue limits purposes (see PSI6.5.89), it is treated as an aggregable “benefit”. The maximum permissible total pension benefit for the employee must not exceed the amount of pension benefit that could have been paid to the employee had his or her benefits not be subject to a pension sharing order less the pension equivalent of the pension debit. The provisions of section 31 of the Welfare Reform and Pensions Act 1999 (see PSI6.5.88) are used as the basis for determining the pension equivalent of the pension debit. As well as normal retirement date, the pension debit must also be taken into account in the following circumstances

• when the employee leaves pensionable service with a deferred benefit (see PSI13.3.32)
• when the employee retires before or after normal retirement date (see PSI10.1.31 or PSI Part 9), including on grounds of incapacity (see PSI10.2.9)
• when benefits have been paid to the employee on retirement (see PSI7.1.19)
• on the employee’s death in service (see PSI11.3.12)
• on death in retirement (see PSI12.1.18)
• the transfer of the employee’s benefits to

Details of a pension debit do not have to accompany a transfer to a simplified defined contribution scheme.

The pension debit will also have an effect on the maximum permissible lump sum that can be paid to the employee (see PSI8.1.44).