(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)
The rules of all final salary and money purchase schemes
(other than a simplified defined contributions scheme - see
PSI1.1.22 and Part 22) must
include the Revenue limits on the members' aggregate benefits which
may be provided (see
PSI6.5.32). Scheme rules
should normally express the Revenue limit on lump sum retirement
benefits as "3/80ths of final remuneration for each year of service
up to a maximum of 40 years at NRD or such greater amount as will
not prejudice approval by the Inland Revenue for the purposes of
Chapter I Part XIV of ICTA 1988". This limit is modified for
members whose benefits are permanently reduced by the effects of
the pension sharing on divorce order (see
PSI3.5.4) and the pension
debit has to be taken into account for Revenue limits purposes (see
PSI6.5.89 and
PSI8.1.44). The administrator can
however use any other form of words which has a similar effect. But
if the limits written into the rules are inadequate let the agents
have a copy of the specimen limits rule (PS123) and the model rules
for pension sharing on divorce. A limit rule of the kind described
in this paragraph is not appropriate for an individual arrangement.
The terms of the arrangement should reflect the employee's actual
circumstances.
