RPSM09103160 - Technical Pages: Member benefits: An alternatively secured pension: Transferring an alternatively secured pension fund

Transfer of an alternatively secured pension fund

A transfer will only be recognised if it is made to a new arrangement in another registered pension scheme.

An alternatively secured pension fund held under a money purchase arrangement cannot be transferred to another arrangement held under that same registered pension scheme. If such a transfer is made the provisions of the tax legislation effectively disregard that transfer, treating the alternatively secured pension fund as still being held under the original arrangement.

This ensures that funds cannot be transferred between different arrangements in the same scheme in order to draw more annual income than would be permitted by the unsecuredpension rules.

FA 2005 contains a power enabling HMRC to make regulations that provide that an alternatively secured pension fund may only be transferred to another registered pension scheme if the transfer is to a new arrangement under that scheme that has no other sums or assets held in it. If this is not done the transfer will not be a recognised transfer, and the transfer payment will represent an unauthorised member payment. The member will then become liable to an unauthorised payments charge on the payment.

These regulations may also specify how the sums and assets transferred must be treated in the new arrangement.

The alternatively secured pension provided from the transferred alternatively secured pension fund may only be guaranteed in the receiving scheme, if the pension paid under the transferring scheme was also guaranteed, and then only to the point that earlier guarantee applied to (so if the transferring alternatively secured pension has been guaranteed for 6 years already, the alternatively secured pension provided under the receiving arrangement can only be guaranteed for another 4 years). A guarantee will only be available where the member died before 6 April 2007 (see RPSM09103120).

Following a transfer of the alternatively secured pension fund from one registered pension scheme to another, the minimum and maximum alternatively secured pension limits (see RPSM09103050) for the alternatively secured pension year apply to the joint income received from both the receiving and transferring schemes. The minimum income requirement will only bite at the end of the alternatively secured pension year, and so will be of most concern to the receiving scheme. The maximum income limit can be crossed at any time by either scheme.