RPSM03110080 - Technical Pages: Protecting pension rights from tax charges: Retained benefit practice before 6 April 2006: September 1991 glossary definition

IR12 Practice Notes September 1991 version

Glossary of terms used in the Practice Notes - retained benefits

The term retained benefits is used to have different meanings in separate contexts. In general it means retained rights to relevant benefits (other than refunds of contributions) built up in previous employments or periods of self employment (whether alone or in partnership) from schemes or contractual arrangements which have benefited from tax privileges. These include the following:

1. retirement benefits schemes approved or seeking approval,
2. relevant statutory schemes,
3. funds to which Section 608 applies,
4. retirement benefits schemes which have been accepted by the Inland Revenue as “corresponding” for the purposes of section 596(2)(b),
5. retirement annuity contracts or trust schemes approved under section 620, or personal pension schemes approved under section 631 (other than arrangements thereunder to which only minimum contributions are paid during a period of membership of non-contracted out occupational pension schemes) which related to relevant earnings from the current employment, or previous employments (including periods of self employment whether alone or in partnership),
6. transfer payments from overseas schemes held in a type of arrangement defined in a, b or e above.

Benefits from these sources, which have been transferred to another scheme (whether or not in the UK) or bought out continue to be regarded as retained benefits. Such benefits which have built up in relation to a wholly concurrent employment or occupation are not retained benefits in relation to the other concurrent employment but where in the case of a member without continued rights the concurrent employments are not associated and the schemes are not connected (benefits for such members arising under connected schemes and/ or under one scheme in respect of associated employments cannot be retained benefits) or where in the case of a member with continued rights, the period of concurrent employment extends only to part of the overall period -of service, that part of the benefits which relates to that part of service where there was no concurrent employment is to be taken into account as a retained benefit. In the case of a concurrent employment and/or occupation to which a personal pension scheme or retirement annuity contract relates, any part of the benefits from those sources which relate to a period when concurrency did not exist is to be taken into account as a retained benefit whether or not there has at any time been an association between the employments or between the employment and the occupation.

Any benefits from retirement annuity contracts or personal pension schemes arising from premiums or contributions paid out of relevant earnings from the current employer are to be treated as retained benefits except in the case of a controlling director not entitled to continued rights where paragraphs 7.7 and 8.7 apply. This is an aggregable benefit.

In the context of total benefits the aggregate retained benefit will be expressed in terms of pension and include the pension equivalent of any retirement benefits in other than pension form from relevant sources. If the aggregate from all sources does not exceed £260 it may be ignored.

In the context of lump sum retirement benefits, it will be the amount of lump sum benefits received or receivable from relevant sources but they may be ignored if they do not exceed £2,500 in total.