RPSM09103150 - Technical Pages: Member benefits: Member benefits: An alternatively secured pension: Limits not complied with
Where the alternatively secured pension limits are not complied with
| [s181A][s208 to 212][s165(1), ‘Pension rule 7’][Para 12 and 13, Sch 28] |
Except in the two (or notionally three) situations described
below (when the minimum income requirement does not apply, a member
must draw an income from his/her alternatively secured pension fund
in respect of a money purchase arrangement under a registered
pension scheme of between 55% and 90% of the basis amount in each
alternatively secured pension year which commences on or after 6
April 2007 (see
RPSM09103030).
Where an
arrangement makes a payment in a
pension year that breaches the maximum
alternatively secured pension payment permitted
for that period, the excess is an
unauthorised member payment.
That excess is taxed in accordance with
RPSM04104510.
The unauthorised member payment may also give rise to
- a scheme sanction charge – see RPSM04104800, and/or
- an unauthorised payments surcharge – see RPSM04104600
| S181A |
Amount below 55% of basis amount
Where in the case of any alternatively secured pension fund, the minimum level of income of at least 55% of the basis amount is not paid out of the member’s alternativelysecured pension fund in any alternatively secured pension year beginning on and after 6 April 2007, the scheme administrator is deemed to have made a scheme chargeable payment. But the requirement to draw a minimum level of income of at least 55% of the basis amount does not apply to an alternatively secured pension year if:
- it is the alternatively secured pension year ending immediately before the death of the member, or
- in the alternatively secured pension year the member’s fund is applied towards the provision of a scheme pension or lifetime annuity.
and so no scheme chargeable payment arises in these two
circumstances.
There is something approaching a third exclusion, which
applies in the circumstances described in the fourth paragraph of
RPSM09103100, however as that
applies to a fund held in suspense before it can strictly be
labelled an alternatively secured pension fund, the circumstance
cannot really be counted as a third exception.
Where a scheme chargeable payment does arise, the amount of
the scheme chargeable payment is the difference between:
- the total amount of alternatively secured pension paid to the member, or nil if no payments are made, in respect of the arrangement in the alternatively secured pension year, and
- 55% of the basis amount for the alternatively secured pension year.
The minimum income requirement also applies even where the scheme does not offer the member income withdrawals from the fund as an option therefore a tax charge could arise where the member does not comply with scheme rules requiring them to use their fund to purchase a lifetime annuity or scheme pension before they are 75. See RPSM04104800 for further information on the tax charge.
| Glossary ( RPSM20000000) |
