RPSM14300100 - Scheme Administrator Pages: Transfers: Receiving a transfer payment in a registered pension scheme: Transfer is from abroad - recognised overseas pension scheme

Transfer is from abroad - recognised overseas pension scheme

Your scheme's rules may allow you to accept transfers from abroad.

If a member, or prospective member, wishes to transfer funds or rights from a pension scheme from abroad into your scheme, you may wish to know what type of scheme it is from.

Tax relief

If the transfer to your pension scheme is from a recognised overseas pension scheme that is not a registered pension scheme, it is not a recognised transfer.

However, it is still a transfer, and because the legislation specifically states that an amount received by transfer from another pension scheme is not a contribution, the transfer payment does not qualify for tax relief on being received in your registered pension scheme. You would not therefore include it in any relief at source claim you make from HMRC in connection with contributions to your scheme.

The funds transferred are not therefore tax relieved. Instead, an enhanced lifetimeallowance can be given to the member (see below). The member needs to register for this higher lifetime allowance with HMRC, and provide evidence of this to you when eventually crystallising his benefits.

There is no unauthorised payment or scheme sanction charge on such a transfer. It is not classed as an unauthorised payment - unauthorised payments are payments from registered pension schemes.

Member's lifetime allowance

The underlying principle is that, because the amount transferred has come from a scheme which is roughly equivalent to a registered pension scheme but where contributions did not attract UK tax relief, that amount should not give rise to a lifetime allowance charge. (That charge is intended to recoup excess UK tax relief). The member's lifetime allowance is therefore increased by the same proportion as the transfer value bears to the lifetime allowance at the time of transfer. However, if any part of an amount transferred from a recognised overseas pension scheme relates to UK tax relieved contributions made after 5 April 2006, then the transfer value will be reduced when calculating the enhancement of the lifetime allowance (see pages RPSM13200030 to RPSM13200050).

You do not have to take any special action with regard to HMRC when you receive such a transfer or subsequently. But when the member has a benefit crystallisation event ( BCE) which brings the member's aggregate crystallised rights over the standard lifetimeallowance, it is likely that you may wish to ask for evidence of the member's enhanced lifetime allowance before paying benefits and before informing the member of the percentage of lifetime allowance used up by the BCE. If you make an unauthorised payment, you are liable to the scheme sanction charge (see RPSM04104800).