RPSM14300110 - Scheme Administrator Pages: Transfers: Receiving a transfer payment in a registered pension scheme: Transfer is from any other type of pension scheme (one that is not registered, and is not a recognised overseas pension scheme)

Transfer is from any other type of pension scheme (one that is not registered, and is not a recognised overseas pension scheme)

Your scheme rules may allow you to accept a transfer payment from another pension scheme that is neither a registered pension scheme nor a recognised overseas pension scheme, for example

• an employer-financed retirement benefit scheme, or
• a pension scheme abroad that does not satisfy the conditions for being treated as a recognised overseas pension scheme.

Tax relief

You should not treat the transfer payment received as a contribution, because section 188(5) specifically excludes transfer payments between pension schemes from being considered as contributions for tax relief purposes (regardless of whether or not the pension schemes concerned are registered or recognised).

No tax relief is due on the transfer payment on receipt. However, any investment income or gain in relation to the funds once in your scheme is free of income tax and capital gains tax.

Member's annual allowance

The member may ask you for a statement of his payments to the scheme, to help him complete his self assessment tax return.

If under your scheme the member has a defined benefit arrangement or a cash balance arrangement, you should not include the value of the transfer payment in the closing value of the member's rights. You should carry out the valuation at the end of the year including the transferred monies/assets, but then deduct the transfer value from that end-of-annual-period value.

If your scheme is any other type of money purchase arrangement, you should not include the value of the transfer payment in the statement you provide to the member of payments to your scheme in the annual period. This is because, for annual allowance purposes, in a money purchase arrangement only contributions are counted, and a transfer payment is not a contribution.

Member's lifetime allowance

A transfer into a registered pension scheme is not a benefit crystallisation event ( BCE) for lifetime allowance purposes. When the member eventually takes benefits from your scheme, there will be a benefit crystallisation event at that point, and the lifetime allowance test must be carried out.

Where you have received a transfer to your registered scheme from a scheme from abroad, the member's lifetime allowance should only be enhanced if the transferring scheme is a recognised overseas pension scheme. This means that in any other case, you should apply the standard lifetime allowance on a BCE, unless the member tells you that he qualifies for an enhancement due to other special circumstances.