A registered pension scheme may make a loan to the sponsoring employer or any party unconnected to the member. There are 5 tests that are used to determine if a loan to an employer is on a commercial basis (see RPSM07103050).
scheme administrator should ensure that each test
is met in accordance with the guidance at
RPSM07103050 onwards which also
explains how the unauthorised payment is calculated.
Where an unauthorised payment is made, the scheme administrator must report it on the Registered Pension Scheme Event Report form.
If an occupational scheme is set up by a sole trader or a partnership and the sole trader or any partner is a member of the scheme then any loan to the employer will also be a loan to a member and an unauthorised payment will arise.
Where an employer is having genuine difficulties making
repayments and there is an amount of capital or interest
outstanding at the end of the loan period, the scheme administrator
may agree that the loan period may be extended and the loan
repayment date to be postponed or “rolled over” once
for a period up to a further 5 years starting from the standard
Further information on rollovers of loans can be found at RPSM07103160.
Providing that there are no changes to the repayment terms made to a loan advanced prior to 6 April 2006, the loan will be subject to the rules in existence prior to 6 April 2006.
If after the 6 April 2006 there is a change in the repayment terms of a loan taken out before that date, any amount owing (including interest) will be subject to the new rules.
The rules for rollovers of loans taken out before 6 April 2006 are covered at RPSM07103200.
|Glossary ( RPSM20000000)|