RPSM03109032 - Technical Pages: Protecting pension rights from tax charges: Death benefits: Enhanced protection and contributions

When contributions can be paid to an other money purchase arrangement to provide death benefits for an individual with continuing enhanced protection

Contributions may be paid to an other money purchase arrangement after 5 April 2006 where

1. They are used to pay premiums under a policy of insurance and that policy of insurance was made before 6 April 2006. However where such a policy is surrendered and replaced by a new one either as part of

the new policy can be treated as a pre 6 April 2006 policy.

2. There is no right to surrender any rights under the policy.
   
   
3. There are no payments under the policy except on the individual’s death, and
   
   
4. The policy is not varied significantly to either increase the prospective benefits or extend the term of the policy. Guidance on what is a significant variation to an insurance policy can be found in the Insurance Policyholder Taxation Manual at IPTM8145 and IPTM8150. However a variation made in order to comply with the Employment Equality (Age) Regulations 2006 - SI 2006/1031 - or the Employment Equality (Age) Regulations (Northern Ireland) 2006 - SR 2006/261 – or any regulations amending or replacing them, can be ignored for the purposes of this test.

Surrendering a policy as part of a retirement-benefit compliance exercise

An occupational pension scheme as defined by section 1 Pension Schemes Act 1993 cannot include members whose only rights under the scheme is the potential right to death benefits, i.e. they are not accruing pension benefits. In order to comply with either section 255 of the Pensions Act 2004 or Article 232 of the Pensions (Northern Ireland) Order 2005 – SI 2005/255 – such members may be removed from the scheme. Alternatively schemes may choose to comply by removing all death benefit provision from the scheme leaving only pension benefits under the occupational pension scheme. Where an insurance policy in existence on 5 April 2006 is surrendered and a new policy is taken out under another registered pension scheme

• in order to ensure the original occupational pension scheme complies with either section 255 or article 232, and
• the rights under the old policy and the new policy are not significantly different

the new policy can be treated as a pre 6 April 2006 policy.

Surrendering a policy as part of an age-equality compliance exercise

Where an insurance policy in existence on 5 April 2006 is surrendered and a new policy is taken out

• in order to comply with the Employment Equality (Age) Regulations 2006 or the Employment Equality (Age) Regulations (Northern Ireland) 2006 (or any regulations amending or replacing them) and
• any significant difference between the old and new policy is solely due to complying with those regulations

the new policy can be treated as a pre 6 April 2006 policy.