PSI13.3.7 - Withdrawal from Service: Deferred Benefits - Maximum Deferred Benefits - Schemes Approved Pre-27.7.89
(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 benefits scheme which was approved on or after 27 July 1989
may provide for:
- Finance Act 1989 members (viz those without continued rights) who leave the employer's scheme before NRD but remain in the employment, and
[PN10.10]
- Continued rights members leaving pensionable service who do not opt for the Finance Act 1989 "package" (see PSI13.3.5(ii) above),
is a deferred pension (inclusive of the pension equivalent of any deferred lump sum benefits) of the greater of 1/60th of final remuneration for each year of service (up to 40 years) or an amount calculated on the formula N/NS x P where:
N is the number of actual years' service completed up to the
termination of pensionable service (up to 40 years).
NS is the number of years' potential service to NRD. This may
be limited to 40 to give a better result where the employee can
complete more than 40 years' pensionable service.
P is the maximum pension that would have been approvable if
the employee had remained in service to NRD (see Part 6, Section 5)
by reference to final remuneration calculated at the date of
termination of pensionable service.
Any restriction for
- retained benefits (see PSI6.5.51-69), and/or
- pension debits (see PSI13.3.32) - where the member’s benefit entitlement 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)
at their value at the date of termination of pensionable service must be made in arriving at P before multiplying by the fraction N/NS.
These are also the maximum benefits that a defined benefits
scheme which was approved prior to 27 July 1989 may provide for
those members who leave pensionable service and who do not opt for
the Finance Act 1989 "package" (see
PSI13.3.5(ii) above).
Scheme rules may restrict the application of the N/NS formula
to members whose earnings while a member of the scheme have
exceeded £10,000 and who at the time of leaving pensionable
service are 45 years of age or more. Where as a result of the
restriction the N/NS x P formula does not apply, the maximum total
benefits will be as set out in
PSI6.5.6, PSI6.5.8 or
PSI13.3.5 depending on which regime
applies to the member, and calculated by reference to years of
service to and final remuneration at the date of termination of
pensionable service.
[PN10.11]
The deferred benefits of a member described in (1) above may
be augmented when the member subsequently retires or leaves
service. However, any such augmentation is subject to the
limitation explained in
PSI13.3.6.
- Schemes Approved Pre-27.7.89
These are also the maximum benefits that a defined benefits
scheme which was approved prior to 27 July 1989 may provide for
those members who leave pensionable service and who do not opt for
the Finance Act 1989 "package" (see
PSI13.3.5(2) above).
Scheme rules may restrict the application of the N/NS formula
to members whose earnings while a member of the scheme have
exceeded £10,000 and who at the time of leaving pensionable
service are 45 years of age or more. Where as a result of the
restriction the N/NS x P formula does not apply, the maximum total
benefits will be as set out in PSI 6.5.6, 6.5.8 or 13.3.5 depending
on which regime applies to the member, and calculated by reference
to years of service to and final remuneration at the date of
termination of pensionable service.
[PN10.11]
The deferred benefits of a member described in (i) above may
be augmented when the member subsequently retires or leaves
service. However, any such augmentation is subject to the
limitation explained in PSI 13.3.6.
