RPSM04101150 - Technical Pages: Taxation: Authorised member payments: Scheme administration member payments

Scheme administration member payments

What are scheme administration member payments?

Scheme administration member payments are payments made by a registered pension scheme to or in respect of a member, or former member, for the purposes of administration or management of the scheme. Examples of types of payment which could qualify as scheme administration payments are

• the payment of wages to people involved in administering the scheme,
• payments made for the purchase of a pension scheme asset, or
• an amount reflecting interest earned on a member’s contributions where that amount is paid in addition to a short service refund lump sum.

Payments for the administration or management of the scheme should be made on an arm’s length, commercial basis. If a payment is more than would be expected to be paid on an arm’s length basis the amount over the expected arm’s length price will not be a scheme administration member payment. Any excess will be an unauthorised member payment and taxed accordingly.

Loans to or in respect of a member or former member are not scheme administration member payments.

How are scheme administration member payments taxed?

There are no specific provisions for the taxation of scheme administration member payments so the normal tax rules will apply to each type of payment. For example, wages would be taxed as employment income and interest payments associated with short service refund lump sums would be taxable on the member under section 369 Income Tax (Trading and Other Income) Act 2005 (previously Case III Schedule D).