RPSM08400080 - Employer Pages: Pension Age: When is the latest an employee can take their benefits?
When is the latest an employee can take their benefits?
This is a matter to be determined by the scheme rules. They may state that pension benefits must be taken when the member leaves service of the employer, or at a particular age even if they are remaining in employment, provided the member has reached normal minimum pension age.
If the scheme rules allow a member to take a pension commencement lump sum, one of the conditions for this to be paid free of income tax is that entitlement to it must arise before they reach their 75th birthday. Any lump sum paid to a member where entitlement arose on or after their 75th birthday will be treated as an unauthorised payment and they will be liable to a tax charge. The scheme administrator will also be liable to a scheme sanction charge.
Any benefits which have not been taken by the member’s 75th birthday will be deemed to have been taken at that point and must be tested against the then remaining lifetime allowance, whether actually paid or not. How these benefits are tested will depend on the type of arrangement being administered. For further information see RPSM09100200 and RPSM09100380.