RPSM09100160 - Technical Pages: Member benefits: Overview: Payments: Payments covered by the legislation

Payments covered by the legislation

The legislation defines payment as including any transfer of assets or money’s worth.

Payment made in respect of the member

The legislation catches payments made in respect of the member within the authorised and unauthorised member payment definitions. So payments made by a scheme following the death of the member are equally considered as either an authorised or unauthorised member payments.

Payment to a connected party

The legislation treats a payment made by a scheme to a person connected to a scheme member (who is not a member of the scheme themselves, or a sponsoring employer) as being a payment to that scheme member.

Investments and annuity or insurance contracts

The legislation treats payments made under or in connection with (or benefits provided under or in connection with) any annuity or insurance contract purchased using sums or assets held by a registered pension scheme, or any other form of investment vehicle purchased by the scheme, as payments under the originating scheme. Where the purchased item (annuity, insurance contract, investment vehicle etc) remains in the ownership of the scheme, then the payment is already considered a payment under the registered pension scheme under s161(2), so s161(3) and (4) come to the fore when the ownership of the item does not lie with the scheme. This typically arises where an annuity is purchased by the scheme ‘in the name of the member’, so the annuity contract is then owned by the member and the insurance company is directly liable to the member.

So, for example, where a lifetime annuity is purchased from a money purchase arrangement any payment made by that contract on the death of the annuitant must comply with the pension death benefit rules and lump sum death benefit rule (see RPSM10100050). If the contract provides an unauthorised member payment the payment will be taxed accordingly (see RPSM09100180).

Where a scheme is wound-up

A payment or benefit from an investment or annuity contract purchased by a registered pension scheme is still treated as paid from assets or sums held for the purposes of that scheme where that scheme has wound-up since that purchase. So the investment/contract is still bound by the authorised and unauthorised member payment rules.