RPSM03104510 - Technical Pages: Protecting pension rights from tax charges: Enhanced protection: Relevant benefit accrual: Other money purchase arrangements

Relevant benefit accrual in other money purchase arrangements

Other money purchase arrangements are money purchase arrangements that are not cash balance arrangements,. For these arrangements investment growth from 6 April 2006 will be protected from the lifetime allowance charge.

For other money purchase arrangements, ’relevant benefit accrual’ occurs when a relevant contribution is made after 5 April 2006. A relevant contribution for the purposes of enhanced protection is one of the following

• a relievable pension contribution paid by or on behalf of the individual under the arrangement. Rebates and minimum contributions paid into a money purchase arrangement by HMRC are not relievable pension contributions see Section 188(3)(c) Finance Act 2004. Contributions paid after the member has reached age 75 are not relievable pension contributions;
• a contribution to the arrangement paid by his employer in respect of the individual;
• a contribution paid otherwise than

which is subsequently allocated to the individual’s arrangement.

There are two exceptions to what counts as relevant contributions.

1. Minimum payments under section 8 chapter 48 of the Pension Schemes Act 1993 or section 4 chapter 49 of the Pension Schemes (Northern Ireland) Act 1993 or any amount recovered under regulations made in connection therewith. Where such payments are being made before 6 April 2006 they may continue.
   
   
2. Certain contributions that are used to provide life cover under a policy of insurance will not count as relevant contributions – see RPSM03109032 and RPSM03109120.

The payment of compensation into an other money purchase arrangement after 5 April 2006 could be a relievable pension contribution and so will trigger loss of enhanced protection. Whether it is will depend upon the nature of the compensation. RPSM03104511 explains when compensation will be a relevant contribution that will trigger loss of enhanced protection.

The payment of a ‘relevant consolidation contribution’ to discharge the liability of an unfunded unapproved retirement benefits scheme in accordance with paragraph 48 Schedule 36 will be a contribution that will trigger loss of enhanced protection.

Where the other money purchase arrangement had formerly been a hybrid arrangement relevant benefit accrual occurs if a relevant contribution was paid to the hybrid arrangement at any time after 5 April 2006. In these circumstances enhanced protection is lost as soon as the formerly hybrid arrangement becomes an other money purchase arrangement.