PSI13.3.5 - Withdrawal from Service: Deferred Benefits Maximum Deferred Benefits - Defined Benefit Schemes Post-Finance Act 1989

(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)

Subject to the qualification in PSI13.1.7 the maximum benefits that a defined benefit scheme which was approved on or after 27 July 1989 may provide for employees leaving the employer's service who are:

1. Finance Act 1989 members (viz those without continued rights), and
2. Continued rights members who opt for the Finance Act 1989 "package" (see PSI9.1.11 and PSI10.1.8),

[PN10.9]

is a deferred pension (inclusive of the pension equivalent of any deferred lump sum benefit) of the greater of 1/60th of final remuneration for each year of service (up to 40 years) and the lesser of:

10. 1/30th of final remuneration for each year of service (up to 20 years), and
11. 2/3rds of final remuneration less any retained benefits (see PSI6.5.55).

These are also the maximum benefits that a defined benefit scheme which was approved prior to 27 July 1989 may provide for those members who leave the employer's service and who similarly opt for the Finance Act 1989 "package" as in (2) above.

(a) and (b) are qualified by the retained benefit disregard described in PSI6.5.51 and 6.5.53 and where the member is a controlling director the requirement set out in PSI6.5.67 must be complied with. Where members opt as described above the consequences and conditions explained in PSI9.1.11 and 10.1.8 apply.

This limit is modified (see PSI13.3.32) where a member’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).