RPSM04104640 - Technical Pages: Taxation: Unauthorised payments: Unauthorised payments surcharge: Threshold for surchargeable unauthorised member payments

The surcharge threshold for surchargeable unauthorised member payments

The surcharge threshold is reached if the unauthorised payments percentage reaches 25%.

The unauthorised payments percentage is the total of the percentages that each unauthorised member payment represents in relation to the value of a person’s rights under the registered pension scheme when those payments are made on or after a reference date.

The percentage used up on making an unauthorised member payment is represented by the formula

UMP = the amount of the unauthorised payment

VR = the value of the member’s rights under arrangements relating to the member under the pension scheme when the unauthorised payment is made (or, if the unauthorised member payment is made after the member had died or has otherwise ceased to be a member of the pension scheme, at the date when the member died or otherwise ceased to be a member).

How the member’s rights are valued depends on whether the rights are crystallised or uncrystallised. It will also depend on the form of crystallised benefits and the type of arrangement or arrangements under the scheme. The value of the person’s rights (VR) is the total of the value of the

• crystallised member’s rights and
• uncrystallised member’s rights

RPSM04104660 explains how crystallised member’s rights are valued when calculating the unauthorised payments percentage.

RPSM04104670 to RPSM04104720 set out how uncrystallised member’s rights are valued when calculating the unauthorised payments percentage.

RPSM04104650 gives an example of how the surcharge threshold is used to identify surchargeable unauthorised payments.