PSI21.3.21 - Centralised Schemes: Non-Associated Employers - Limits on Benefits - Pensions

(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)

[PN21.16-17]

Subject to PSI21.2.7a centralised scheme for associated employers may usually base benefits on final remuneration at retirement and total group service. The principle which governs benefits in centralised schemes for non-associated employers is that the benefits should not exceed the maximum approvable under an employer’s own approved scheme (section 592(5) ICTA 88). In practice this means that if an individual has been a member of the centralised scheme in relation to service with more than one employer his/her scheme benefits should not be greater than the maximum approvable aggregate benefits payable had he/she been a member of a succession of separate approved schemes for each of those employers viz other than for the employment ending with retirement on the basis set out in Section 3 of Part 13. This is known as the “successive slice” method of calculating benefits. The successive slice method is complicated and requires detailed records to be kept of service and final remuneration for each period of scheme membership. By concession we are content for schemes to provide total benefits calculated by reference to total service with the participating employers in question and final remuneration in respect of the member’s last period of scheme employment. The maximum benefit calculated in this way must not exceed 1/60th of final remuneration for each year of relevant service up to a maximum of 40 years to count. This limit should take into account any benefits provided for the member under any other schemes of the participating employers. The concession does not extend to the calculation of lump sum retirement benefits which must be limited to the successive slice method as explained in PSI21.3.22.

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