RPSM09100170 - Technical Pages: Member benefits: Overview: Payments: Other transactions regarded as payments

Other transactions regarded as payments

Assignment

If a member of a registered pension scheme (or their personal representatives) assigns, or agrees to assign

• any benefit to which the member, or any dependant of the member, has an actual or prospective right to under the scheme, or
• any right relating to sums or assets held under an arrangement in such a scheme

then an unauthorised member payment is deemed to have been made to that member (or to the member’s personal representatives in respect of the member). The member becomes liable to a tax charge (which may include a surcharge if applicable) in respect of the deemed payment or, where the deemed payment occurs after the member’s death, the member’s personal representatives become liable to the tax charge (or charges) instead.

If any other person, such as a dependant of the member following the death of that member, (or that person’s personal representatives) assigns, or agrees to assign

• any benefit to which that person has a prospective right under a registered pension scheme in respect of a member of the pension scheme, or
• any right in respect of sums or assets held under an arrangement in such a scheme relating to a member of the scheme

then an unauthorised member payment is deemed to have been made to that person (or that person’s personal representatives) in respect of the member. The member becomes liable to a tax charge (or charges) in respect of the deemed payment or, where the deemed payment occurs after the member’s death, the person (or the person’s personal representatives) becomes liable to the tax charge (or charges) instead.

References to a ‘benefit’ in both cases described above include the right to receive

• a scheme pension or dependants’ scheme pension either provided directly by the scheme administrator or purchased from an insurance company with sums or assets held for the purposes of the pension scheme, or
• a lifetime annuity or dependants’ annuity that has been purchased from a insurance company with sums of assets held for the purposes of the pension scheme.

Exceptions in relation to both cases described above are where the assignment is made due to a pension sharing order, or where dealing with a pension guarantee under the scheme or contract following the member’s death. Also, see RPSM09100171 for details about the assignment by the member of death benefits under a term assurance policy.

The amount of unauthorised member payment which is treated as having been paid is the higher of the amount actually received for making, or agreeing to make, the assignment and the amount that would have been received had the transaction been carried out at arm’s length and on the basis that any power to reduce the entitlement to the benefit or right being assigned did not exist.

RPSM04104010 onwards has details of the tax charges in respect of unauthorised member payments.