RPSM09101610 - Technical Pages: Member benefits: A secured pension: Scheme pension: Stopping or reducing a scheme pension: Only one unauthorised payments charge

An additional unauthorised payments charge can only be imposed once on an appropriate amount in relation to a single scheme pension entitlement

Once an additional unauthorised payments charge has been imposed on the appropriate amount following the reduction of a scheme pension entitlement, whether through circumstances discussed in RPSM09101590 or RPSM09101600, then because the charge will effectively recover the tax benefits that applied to the lump sum payment any further reduction in the rate of that pension at a later date will not trigger this charge again.

Example

Barbara’s pension payments are reduced so that the rate of pension payable is 50% of the rate payable when she first became entitled to it. 12 months later her pension payments are reduced a second time later to 10% of the initial rate of the pension to which she was entitled.

The unauthorised payments charge will be triggered only on the first occasion there was a substantial reduction in Barbara’s pension, i.e. the 50% reduction.

The ongoing pension payments actually made will still represent unauthorised member payments in their own right, and Barbara will be liable to a 40% unauthorised payments charge on those payments.