RPSM03101551 - Technical Pages: Protecting pension rights from tax charges: Valuing pension rights at 5 April 2006: Practice Notes print October 1974

Retirement benefits scheme limit: preservation limit for retirement benefits schemes – Practice Notes published 1 October 1974

Following on from RPSM03101531 and RPSM03101550 if 5 April 2006 falls before an individual’s normal retirement date in a retirement benefits scheme and the individual has employer sponsored money purchase rights in the scheme, the calculation of MPP should be carried out on the basis that preservation applies to the benefits.

The relevant preservation calculation will be the one published in the IR 12 ‘Occupational Pension Schemes Practice Notes’ at the time the scheme was approved.

The following is a direct copy of the advice published in the version of IR 12 ‘Occupational Pension Schemes Practice Notes’ published on 1 October 1974.

It applies to any schemes approved under s591 ICTA 1988 (previously s20 FA 1970) before 1 May 1979.

PN 13.4

“A scheme of the type to which Regulation 5 of the Occupational Pension Schemes (Preservation of Benefit) (No2) Regulations 1973 (SI 1973 No 1784) applies (whether or not in existence on 6 April 1974), i.e. a scheme providing benefits based on final remuneration but funded by means of a policy or policies with level annual premiums securing benefits based on current remuneration, may give a member leaving service the amount of deferred pension actually secured by premiums paid up to date of his withdrawal even if this is somewhat in excess of the amount calculated under N/NS x P formula. A money purchase scheme, or a scheme using earmarked policies (see paragraphs 18.10-18.20) must test leaving benefits against the N/NS x P formula unless

When calculating the limit above, final remuneration shall be determined by reference to the maximum amount of earnings allowed under the rules of the scheme for the purposes of calculating the maximum retirement benefits for that individual.