PSI13.3.10 - Withdrawal from Service: Deferred Benefits - Money Purchase Schemes

(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)

Money purchase schemes/arrangements in particular can, as explained in PSI20.4.2, give rise to problems with the level of benefits payable to early leavers. Because the Social Security preservation legislation takes precedence over the 'normal' Inland Revenue limits on an early leaver's pension (see PSI10.1.14and PSI13.1.7), we cannot impose the N/NS x P or N/30ths formulae (as appropriate) where the preserved benefits payable by such schemes are greater and are derived from contributions paid on a consistent basis (but see PSI13.3.4(d)). These problems have been compounded by the use of the traditional level annual contribution method of funding which can produce overfunding in the early life of a scheme/arrangement. This was one of the reasons for the introduction of a revised funding basis which is explained in PSI20.4.2et seq. That funding basis should, in time, remove the problems over our limits for early leavers being exceeded.