RPSM09101510 - Technical Pages: Member benefits: A secured pension: Scheme pension: Stopping or reducing a scheme pension: Circumstances where a scheme pension may be reduced or stopped

Circumstances where a scheme pension may be reduced or stopped

[Para 2(4), Sch 28][Para 11(6) and (7), FA 2005][The Pension Schemes (Reduction in Pension rates) Regulations 2006 - SI 2006/138 as amended by SI 2009/1311] 

There are eight specific circumstances laid out in the legislation where a scheme may provide for the annual rate of a scheme pension payable to a member to be reduced, or the pension itself stopped, without prejudicing that pension’s classification as a scheme pension.

The legislation also gives HMRC the power to lay regulations to prescribe other circumstances where the rate of scheme pension payable may be reduced from one relevant 12-month period to the next.

These eight circumstances are where

• a scheme pension paid on the grounds of ill-health stops or reduces (see RPSM09101520 for more details),
• the reduction in the rate of scheme pension payable is being applied to all scheme pensions being paid under the scheme to or in respect of its members (see RPSM09101530 for more details),
• the scheme pension is a bridging pension that is being reduced or stopped at state retirement age by an amount that does not exceed the state retirement pension entitlement arising at that time (see RPSM09101540 for more details),
• the scheme pension is being reduced while the scheme is being wound-up because there are insufficient sums and assets in the pension scheme to continue to pay the pension at the existing rate (see RPSM09101545 for more details),
• the rate of scheme pension payable is being reduced in consequence of a pension sharing order,
• the rate of scheme pension payable is being reduced due to forfeiture of entitlement, in a manner consistent with circumstances prescribed by regulations laid by HMRC (see RPSM09101550 for more details),
• the rate of scheme pension payable is being reduced in consequence of a court order, and
• a scheme pension payable under a public service pension scheme is reduced due to abatement (see RPSM09101560 for more details).

References to reduction of a scheme pension, either above or on linked pages, include circumstances where the pension is reduced entirely (so the pension ceases to be payable), whether temporarily or permanently.