PSI10.1.14 - Retirement before Normal Retirement Date: General – Pre-FA 89 basis - Effect of Preservation Legislation

(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)

[PN7.37]

The N/30ths (see PSI10.1.7) and N/NS x P (see PSI10.1.12) limits on an early retirement pension are not absolute. The Social Security preservation legislation may give an early leaver a right to a preserved pension greater than the formulae above will produce and we cannot therefore enforce the 'normal' Inland Revenue limits (see PSI13.3.2). This situation generally arises on money purchase schemes. The preservation legislation requires that the value of an early retirement pension should be at least equal to the value of the employee's preserved benefits (see Part 13, Section 3 PSI13.3.1). Our current practice on limits for early retirers in money purchase schemes is set out in paragraphs 7.5 and 7.47 of Practice Notes.

For schemes approved prior to the issue of Practice Notes on 29 November 1991, the limit for an early retirer is a pension of 2/3rds of final remuneration (calculated at the date of early retirement) having due regard to retained benefits, plus any statutory revaluation increases required by the relevant Social Security legislation.

These limits are, of course, applicable only where the member has completed at least 2 years qualifying service with the employer otherwise 'normal' Inland Revenue limits will apply. 'Normal' Inland Revenue limits apply to an early retirer's lump sum benefits.

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