RPSM03110030 - Technical Pages: Protecting pension rights from tax charges: Retained benefit practice before 6 April 2006: October 1974 lump sum

IR 12 Practice Notes October 1974 version

Retained lump sum benefits

8.7

A lump sum of 3N/80ths may usually be given to a late entrant under any scheme approved under the new code irrespective of lump sums earned by earlier service with other employers ("retained lump sum benefits") but any increase under the preceding paragraph is subject to the proviso that the increased lump sum shall not when aggregated with retained lump sum benefits exceed 120/80ths of final pay.

Retained lump sum benefits include:

1. lump sums received or receivable from any scheme other than one of the State schemes, including sums received or receivable in commutation of pension,
2. sums received or receivable in commutation of retirement annuities under contracts approved -under section 226, Income and Corporation Taxes Act 1970,
3. amounts received by way of refund of contributions and any interest thereon, if they were received after the age of 45 and exceeded £2,000.

Benefits at a and b may be ignored if they do not exceed £200 in all.

In practice, though they have an enhanced value by reason of early payment, lump sums already received may be taken at their actual amount.

20% directors also former controlling directors as defined in Section 224(1), Income and Corporation Taxes Act 1970, who have paid premiums under retirement annuity contracts during non-pensionable service and are later given lump sums under a new code scheme may be required to take lump sums under the retirement annuity contracts into account even though the scheme lump sums do not exceed 3N/80ths for total service with the company; lump sums under all retirement annuity contracts must be taken into account not merely those purchased during any period of back service in respect of which lump sums under the scheme are paid.