RPSM03301080 - Scheme Administrator Pages: Protecting pension rights from tax charges: Valuing pension rights: Maximum permitted pension

Maximum permitted pension (MPP) for approved schemes, deferred annuity contracts and statutory schemes set up after 13 March 1989

The value of the maximum permitted pension (MPP) for arrangements under a scheme that is not a statutory scheme set up before 14 March 1989 is the maximum annual pension that a scheme approved under Chapter 1 of Part 14 of Income and Corporation Taxes Act 1988 could pay to an individual in good health on 5 April 2006 without giving HMRC grounds for withdrawing the scheme’s approval. In arriving at MPP two assumptions should be made, that

• if the individual was in the employment to which the arrangement(s) related on 5 April 2006, the individual is deemed to leave the employment on that date.
• the HMRC would permit immediate payment of pension benefits to individuals at any age, without affecting the approval of the scheme.

For the avoidance of doubt the calculation of MPP cannot include service after 5 April 2006, so for pre 1989 members the N/NS x P formula may apply when calculating the maximum permitted pension. However where benefits are provided under a money purchase arrangement see RPSM03301100 as the N/NS x P limit may not apply.