RPSM03104505 - Technical Pages: Protecting pension rights from tax charges: Enhanced protection: Relevant benefit accrual

Relevant benefit accrual

The test used to see if ‘relevant benefit accrual’ has occurred depends on the type of arrangement under which the individual’s benefits are being provided. There are different rules for

• Other money purchase arrangements, and
• Cash balance or defined benefits arrangements.

RPSM03104510 explains when relevant benefit accrual occurs in a money purchase arrangement that is an other money purchase arrangement.

RPSM03104520 explains when relevant benefit accrual occurs in a defined benefit or cash balance arrangement.

The position for hybrid arrangements, which eventually may be either other money purchase, cash balance or defined benefits arrangements is described in RPSM03104515.

Essentially the relevant benefit accrual test for other money purchase arrangements is an input test. So payment of benefits from this type of arrangement will not trigger loss of enhanced protection

The relevant benefit accrual test for defined benefits or cash balance arrangements is an output test. So contributions to these types of arrangement will not trigger loss of enhanced protection but the payment or transfer of benefits may cause loss of enhanced protection. Contributions to these types of arrangements may continue after 5 April 2006 without causing loss of enhanced protection.

Benefits may continue to accrue under defined benefits or cash balance arrangements after 5 April 2006. However if benefits accrue at more than a set rate enhanced protection will be lost (see RPSM03104520 to RPSM03104525). So by continuing to accrue benefits after 5 April 2006 individuals run the risk of losing enhanced protection when benefits come into payment or are transferred.