A registered pension scheme may receive a transfer payment from another scheme that is neither a registered pension scheme nor a recognised overseas pension scheme, for example
A transfer payment is not a contribution, because section 188(5)
specifically excludes transfer payments between pension schemes
from being considered as contributions for tax relief purposes
(regardless of whether or not the pension schemes concerned are
registered or recognised).
No tax relief is due on the transfer payment on receipt.
However, any investment income or gain in relation to the funds in
the receiving scheme is free of income tax and capital gains
tax.
If the rights are being transferred into a
defined benefit arrangement or a
cash balance arrangement, the value of the
transfer payment should be deducted from the closing value of the
member's rights.
If the rights are being transferred into any other type of
money purchase arrangement, the transfer payment
is not included for the annual allowance. This is because, for
annual allowance purposes, in a money purchase
arrangement only contributions are counted, and a transfer payment
is not a contribution.
A transfer into a registered pension scheme is not a
benefit crystallisation event (
BCE) for
lifetime allowance purposes. When the member
eventually takes benefits, there will be a benefit crystallisation
event at that point, and the lifetime allowance test must be
carried out.
Where the transfer to a registered pension scheme has come
from a scheme abroad, the member's lifetime allowance should only
be enhanced if the transferring scheme is a recognised overseas
pension scheme. In any other case, the
standard lifetime allowance applies on a BCE,
unless the member qualifies for an enhancement due to other special
circumstances.
| Glossary ( RPSM20000000) |
