RPSM09100330 - Technical Pages: Member benefits: Overview: Authorised benefits: Types of authorised lump sum benefits

Types of authorised lump sum benefits that may be paid to a member

[s166] [Sch 29] [s164(f)] [Ref 2(a) The Registered Pension Schemes (Authorised Payments) Regulations 2006 - SI 2006/209]

There are eight authorised lump sum payments listed in the lump sum rule. The circumstances and conditions defining those payments are set out explicitly in the legislation. These are collectively referred to in the legislation as an ‘authorised lump sum’.

Each of the eight different authorised lump sum payments has different characteristics. Some are paid tax-free, and some are subject to specific tax charges.

Any lump sum paid by a registered pension scheme that meets one of the eight definitions will be an authorised member payment. Any lump sum payment that does not fall within one of these definitions will be an unauthorised member payment and will be taxed accordingly (see RPSM09100180).

The eight types of lump sums that are authorised member payments are

• a pension commencement lump sum - see RPSM09100340 for details,
• a stand-alone lump sum,
• a serious ill-health lump sum,
• a refund of excess contributions lump sum,
• a trivial commutation lump sum,
• a lifetime allowance excess lump sum,
• a short service refund lump sum, and
• a winding up lump sum.

RPSM09100360 has more information on the lump sum payments that are not a pension commencement lump sum.

In addition to the authorised payments under the 'lump sum rule', certain other lump sum payments specified in regulations are also authorised payments when they are made by registered pension schemes. This includes the payment of certain lump sums representing commuted equivalent pension benefits (contracted-out rights earned between 1961 and 1975). See page RPSM09105300 for more details.