PSI14.2.56 - Transfer Payments: Benefits from Transfer Payments – Pension Sharing on Divorce

(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)

Where an employee’s benefit entitlement in the transferring 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)

details of the pension debit must accompany the transfer payment (see PSI14.1.4). The pension debit details must be a figure that represents the deferred pension equivalent of the pension debit established at the date of the divorce increased between the date of divorce and the date of transfer by the rate of revaluation that would have applied to deferred benefits generally (see PSI6.5.97). Pension debit details do not have to accompany a transfer to a simplified defined contribution scheme but note that the pension debit is taken into account for the purpose of a lump sum certificate (see PSI14.2.58)

The pension debit details must be passed to the receiving scheme to ensure that the pension debit continues to be taken into account for Revenue limits purposes otherwise a transfer might be used as a device to build benefits back up to the pre-sharing Revenue limit. The receiving scheme must continue to revalue the pension debit between the date of receipt of the transfer payment and the date on which the member

• takes benefits from the receiving scheme
• transfers to another scheme – details of the pension debit revalued for the entire period between the date of divorce and the date of the subsequent transfer must be passed to the receiving scheme unless the receiving scheme is a simplified defined contribution scheme, or
• dies before taking or transferring benefits from the receiving scheme.