RPSM14102010 - Technical Pages Transfers: Non-recognised transfers from registered pension schemes: Transfer to a non-registered UK pension scheme
Transfer to a non-registered UK pension scheme
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[Section 169(1)] |
A transfer to a UK pension scheme that is not a registered pension scheme is not a recognised transfer.
It is therefore an unauthorised member payment.
Tax charges
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[Section 160(5)] |
Such a transfer incurs a tax charge on the member at a rate of 40% of the payment.
This tax charge - broadly speaking - recoups the tax relief already given in respect of the contributions made by or on behalf of the member, and the income from the investment of those contributions. If the transfer payment and any other unauthorised payments to the member in a 12 month period exceeds 25% of the member's rights under the pension scheme, the member is liable to an unauthorised payment surcharge of a further 15% of the payment.
A scheme sanction charge of up to 40% may also apply, for which the scheme administrator is liable. If the scheme administrator has deducted the member's tax charge from the transfer payment and paid the tax charge to HMRC on the member's behalf, the scheme administrator may reduce the amount of the scheme sanction charge by the lesser of 25% and the amount of member's tax charge deducted as a proportion of the transfer payment.
In addition, if the amounts transferred equate to 25% or more of the scheme fund value, HMRC may withdraw the transferring scheme's registration. This involves a de-registration charge of 40% (see RPSM02105050).
Tax relief
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[Section 188(5)] |
The transfer is not a contribution and no tax relief is due.
Annual allowance
If the transfer was made from a cash balance arrangement, or from a defined benefit arrangement, the amount transferred is not to be included in the closing value when calculating the member's pension input amount for the transferring arrangement. (See RPSM06101020 and RPSM06103010). The closing value is not adjusted where the transfer is not to a registered pension scheme or a qualifying recognised overseas pension scheme.
In a money purchase arrangement that is not a cash balance arrangement, the amount transferred in itself is not included when calculating the member's pension input amount, as only contributions are counted for the pension input amount in such an arrangement.
Lifetime allowance
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[Section 216] |
The transfer is not a benefit crystallisation event for the purpose of the member's lifetime allowance and so is not taken into account for the member's lifetime allowance either on the occasion of the transfer, or on any future crystallisation of other benefits the member might take from registered pension schemes.
Reporting requirement
The transferring scheme administrator must report such a transfer (as an unauthorised member payment) on the Event Report [RPSM12301010]
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Glossary (RPSM20000000) |
