PSI13.1.1 - Withdrawal from Service: General - Background

(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)

In the early years of pension schemes some employers used them in an effort to retain employee's loyalty. A member leaving service before retirement age - an "early leaver" - could normally expect to receive at most a refund of his or her own contributions, if the scheme was contributory. Some schemes did give the employee a deferred annuity but even this did not always reflect the value of the employer's contributions. By the 1960s attitudes changed and greater importance was being attached to the preservation of pension rights. Concern to protect the "early leaver" eventually led to the Social Security Act 1973 which introduced, with effect from 6 April 1975, compulsory requirements relating to the preservation of pensions. The Revenue have over a long period permitted employers to preserve an "early leaver's" benefits and the introduction of compulsory preservation therefore required only minor changes in our practice. These were mainly needed to ensure that our limits on benefits payable by an approved scheme remained intact.