RPSM03110110 - Technical Pages: Protecting pension rights from tax charges: Retained benefit practice before 6 April 2006: January 1995

January 1995 version

7.4

Where the concurrent employments are associated or the schemes are connected, the retained benefit in full is set against benefits from the employment which vest first and any unexhausted balance is set against the benefits from the other employments successively as they vest. If all the benefits vest together the same principle applies but the sequence is immaterial. In this context the vesting date is as defined in paragraph 16.20

7.4A

The requirements of paragraph 7.4 September 1991 version of the IR12 Practice Notes were qualified for certain members of retirement benefits schemes as a result of an administrative easement introduced in 1991 under which it is no longer necessary for retained benefits to be taken into account. The easement applied to new members after August 1991:-

• who were not, and had not been within 10 years prior to joining the scheme, controlling directors in respect of the employment being pensioned and,
• whose earnings for the first year’s employment following entry to the scheme (if a member of more than one scheme of the employer, the test applied following entry to the first scheme) did not exceed ¼ of the permitted maximum (determined at its level on entry). Except where it was clear from the outset that earnings exceed the threshold, the test had to take place 12 months or so after the member joined the scheme

7.4B

Where a member joined a scheme of a new employer with an accrual rate of N/60ths or lower, no retained benefits check was necessary. The payment of additional voluntary contributions by the member at a later date which takes the accrual rate above N/60ths did not necessitate a retained benefits check provided the member’s earnings for the first year following entry to the scheme did not exceed ¼ of the permitted maximum calculated at the date of entry. Where the payment of additional voluntary contributions were commenced by a member who joined the scheme prior to the introduction of the permitted maximum, earnings in the year’s employment following commencement of the initial additional voluntary contribution should have been used for the purpose of the ¼ of the permitted maximum test.