RPSM13102510 - Technical Pages: International: Application of charges to non-UK schemes: Lifetime allowance: General

General

Paragraphs 13 to 19 of schedule 34 modify the lifetime allowance provisions so as to apply the lifetime allowance charge to members of overseas pension schemes that are not registered pension schemes in certain circumstances. The lifetime allowance provisions are explained in detail at RPSM11100000. You should read that section before continuing with the following description of what schedule 34 does.

Broadly, under the lifetime allowance provisions every individual has a lifetime allowance which is the total capital value of benefits that they can draw from registered pension schemes without triggering a lifetime allowance tax charge. The lifetime allowance also covers transfers to certain overseas pension schemes. When an individual's benefits crystallise the capital value of those benefits is tested against their lifetime allowance. Their lifetime allowance is used up or reduced as a consequence, and the capital value of any benefits that crystallise after that will be tested against any remaining allowance.

The lifetime allowance charge is intended to recoup excess UK tax relief that an individual has received. So it has to apply to an individual's benefits from overseas pension schemes that have attracted UK tax relief, as well as to benefits from registered pension schemes.

Schedule 34 applies the lifetime allowance provisions to an individual who is a relieved member ( RPSM13102140 refers) of a relieved non-UK pension scheme ( RPSM13102520 refers) as if the scheme were a registered pension scheme.

Amongst other things, this means that an individual will lose enhanced protection if they become a relieved member of a relieved non-UK pension scheme after 5 April 2006 unless the individual is becoming a member of the scheme as a consequence of a permitted transfer made to the scheme ( RPSM03104090). An individual who is already a relieved member of a relieved non-UK pension scheme before 6 April 2006 will lose enhanced protection immediately if a relevant contribution is made to an other money purchase arrangement under the scheme. Such an individual will be able to accrue benefits in a defined benefits arrangement or a cash balance arrangement under the relieved non-UK pension scheme, but in almost all cases will lose enhanced protection whenever a benefit is taken in respect of the individual (see RPSM03104070).

This part explains what relieved non-UK pension schemes are, who relieved members are, and how the lifetime allowance charge provisions apply to them.