PSI14.1.2 - Transfer Payments: General - Revenue Concern

(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)

[PN10.26]

An early leaver from a scheme may have deferred benefits left in paid-up form in his or her former employer's scheme (see Section 3 of Part 13) or bought-out (see Section 4 of Part 13) and in both cases these are generally treated as retained benefits. But an alternative to deferred or bought-out benefits is for the early leaver to have a transfer value paid to a new employer's scheme. Unless the transfer is from a scheme of the same or an associated employer, the benefits provided from it need not be subject to the receiving scheme's limits rule. The transfer benefits will, however, fall to be treated as retained benefits for the purpose of the receiving scheme's limits rule. Where an early leaver's accrued benefits have built up under an exempt approved scheme, the funds underlying them will have accumulated on a tax-free basis. We thus have an interest in seeing that a transfer payment does not give anything which is contrary to the purpose for which tax reliefs and exemption are given under the legislation. We do this by requiring that:

1. a transfer value should be paid only to a scheme or arrangement which is approved or enjoys tax advantages (see PSI14.1.5), and
2. that the benefits payable by the receiving scheme in respect of the transfer are neither excessive in amount nor in an unacceptable form (see Section 2 of this Part).

Transfers in accordance with a. must be made either between schemes directly or through an independent broker.