| s184 |
A registered pension scheme is authorised to borrow an aggregate amount up to 50% of the net value of the fund immediately before the borrowing has taken place. The value of the asset being purchased using the borrowing must therefore not be taken into account when calculating the value of the fund unless, exceptionally it is already held as an asset of the scheme before the borrowing takes place (e.g. a re-mortgage). Scheme administrators/ trustees must take into account any existing borrowing when calculating the limits.
PP Ltd Registered Pension Scheme has assets worth £200,000
but has a liability in the form of borrowing of £50,000.
The maximum amount which can be borrowed is £200,000
less £50,000 x 50% = £75,000, i.e. further borrowing
allowed of £25,000.
For money purchase arrangements the limit applies to each
separate arrangement. For other arrangements the limit is applied
to assets held in the scheme as a whole (less any which are,
exceptionally, held in money purchase arrangements).
The value of the fund is calculated in different ways
depending on whether the scheme is a money purchase scheme (see
RPSM07104030) or another type of
arrangement (see
RPSM07104040).
If the scheme assets drop in value after the borrowing is
obtained, which results in the borrowing exceeding the 50% limit,
there is no need to retest the borrowing limits unless any further
borrowing takes place.
The 50% limit is the total amount which a
registered pension scheme can borrow: there is no
separate limit to fund a liability for VAT, for example.
The 50% limit is strictly applied to the value of the fund
immediately before the borrowing takes place.
| Glossary ( RPSM20000000) |
