RPSM03106064 - Technical Pages: Protecting pension rights from tax charges: Taking benefits before normal minimum pension age: Employment after taking benefits - 2010
Loss of protection due to employment after taking benefits: protected pension ages 50 to 54
|[Para 22(7)(b) & 22(7B) -(7J) Sch 36]|
The restrictions described below only apply where benefit entitlement arises after 5 April 2010. They do not apply where benefit entitlement arose before 6 April 2010. Once the individual reaches the normal minimum pension age of 55 the restrictions cease to apply.
Protection will be lost where the main purpose (or one of the main purposes) for early entitlement to benefits using a protected pension age is to avoid paying tax or national insurance contributions.
Protection will be lost if after becoming entitled to benefits the individual is employed by one of the following employers and one of the four re-employment conditions listed below is not met.
- An employer who employed the individual in the six months before benefit entitlement arose, and who was also a sponsoring employer in the scheme under which benefit entitlement arose in that six month period.
- Any person connected with the employer described in the previous bullet point. Note that under this condition the person employing the individual does not need to be a sponsoring employer.
- Any sponsoring employer in the pension scheme under which benefit entitlement arose that is connected with the individual.
Connection has the meaning given in s993 ITA 2007. The Capital Gains Manual - CG14580 to CG14623 - gives information on who connected person are for the purposes of s993 ITA 2007.
The four re-employment conditions are set out in more details in RPSM03106065 but broadly are
- recall by the Armed Forces
- a break in employment of at least six months
- a break in employment of at least one month and benefits may be abated
- a break in employment of at least one month and the re-employment is materially different.
If the individual is not employed by any of the employers listed above the individual does not have to meet any of the four re-employment conditions.
Andy becomes entitled to benefits from the an industry wide pension scheme on 7 April 2010 aged 54 in respect of his employment with employer 1 Ltd. On 8 April Andy becomes employed by employer ABC Ltd. As this company is not a sponsoring employer in the industry wide scheme and is not connected to employer 1 Andy will not lose his protected pension age.
Andy could also have gone to work for employer 2 Ltd. Employer 2 Ltd is also a sponsoring employer in the industry wide pension scheme. However because employer 2 Ltd is not connected either to Andy or employer 1 Ltd, and did not employ Andy in the 6 months before 7 April 2010 Andy would not lose his protected pension age by becoming employed by employer 2 Ltd.