RPSM07103170 - Technical Pages: Investments: Loans: Loans to members and connected parties/companies

Loans to members and connected parties/companies

Any loan made by a registered pension scheme to a person who is, or has been, a scheme member or person/ company connected with the person who is, or has been, a scheme member or sponsoring employer will result in an unauthorised payment equal to the amount of the loan - see RPSM07108010. A scheme sanction charge (see RPSM07108030) will also be made on the scheme administrator or appropriate default person.

Section 171(4) confirms that a loan to or in respect of a member of the pension scheme is not a scheme administration member payment and would not fall within the section 164 definition of being an authorised member payment.

A payment made by a registered pension scheme to a person who

1. is connected with a member or sponsoring employer (or was connected with a member at the date of the member’s death) and
2. is not a member or sponsoring employer

will be treated as though it was made in respect of the member or sponsoring employer.

The definition of a connected person is determined by section 839 Income and Corporation Taxes Act 1988 (ICTA)(see RPSM07103180).