RPSM09300150 – Scheme Administrator Pages: Member benefits: Lump sum payments

Short service refund lump sum

A lump sum payment which does not exceed the amount of member contributions to the scheme may be treated for tax purposes as a short service refund lump sum providing it satisfies the following conditions

• the registered pension scheme making the payment is an occupational pension scheme,
• the member’s ‘pensionable service’ under the scheme was terminated before ‘normal pension age’ and the member is not entitled to a ‘short service benefit’ by virtue of section 71 of the Pension Schemes Act 1993. ‘Pensionable service’, ‘normal pension age’ and ‘short service benefit’ are defined in section 181(1) of the Pension Schemes Act 1993,
• the member has not previously been subject to a lifetime allowance test in relation to that scheme (not just a particular arrangement). So there have been no previous benefit crystallisation events triggered under that scheme in relation to that individual,
• the payment of the lump sum extinguishes the member’s entitlement to benefits under the scheme, and
• the lump sum is paid before the member reaches their 75th birthday.

Where interest is paid in connection with the lump sum, please see page RPSM09104740.