RPSM09101350 - Technical Pages: Member benefits: A secured pension: Scheme pension: Overview: Transferring scheme pensions

Transfer of a scheme pension from one insurance company to another

[s169(1A) and (1B)][Para 11(8) and 36, Sch 10, FA 2005] [The Registered Pension Schemes (Transfer of Sums and Assets) Regulations 2006 (SI 2006/499)] 

The transfer of an entitlement to a scheme pension in payment from a registered pension scheme to an insurance company is a recognised transfer, provided the insurance company continues to provide that member with a scheme pension (referred to in the legislation as a ‘new scheme pension’). If the insurance company does not provide the member with a new scheme pension the transfer will not be a recognised transfer, and the transfer payment will represent an unauthorised member payment. The member will then become liable to an unauthorised payments charge on that payment.

This provision ensures that, for example, where an occupational scheme is winding-up, the sums and assets representing any scheme pensions in payment in that scheme may be transferred to an insurance company to provide those member benefits.

The Registered Pension Schemes (Transfer of Sums and Assets) Regulations prescribe that, where the entitlement to a scheme pension in payment is transferred, any new scheme pension will be treated as if it were the original scheme pension provided under the transferring scheme for the purposes of certain clauses in the legislation.

Finance Act 2005 also gives HMRC powers to lay regulations providing that where a scheme pension is being paid by an insurance company, and the liability for that scheme pension is transferred to another insurance company, then the ‘new’ scheme pension paid by the receiving company will be treated as if it were the original scheme pension, for the purposes prescribed in those regulations.