PSI10.2.9 - main

(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)

Total Benefits

Where an employee’s benefit entitlement in the scheme is

• permanently reduced by a pension sharing on divorce order (see PSI3.5.4), and
• the pension debit must be taken into account for Revenue limits purposes (see PSI6.5.89)

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 there been no pension sharing on divorce order (see PSI10.2.7)

less

• the pension equivalent of the pension debit.

Lump sums

The maximum permissible lump sum benefit must not exceed

for a post Finance Act 1989 or Finance (No 2) Act 1987 member

• 2.25 x initial rate of pension payable (see PSI10.2.7) after reduction to take account of the pension debit

and for a pre Finance (No 2) Act 1987 member the greater of

• 2.25 x initial rate of pension payable (see PSI10.2.7) after reduction to take account of the pension debit , or
• the maximum approvable lump sum determined in accordance with the scheme rules as if there had been no pension sharing on divorce order (see PSI10.2.7), reduced by an amount of 2.25 x the pension debit.

The way in which the deferred pension equivalent of the pension debit is determined for both the pension and lump sum limits is the same as applies for an employee who retires early in normal circumstances. The examples in PSI10.1.34 explain how the pension debit is calculated.