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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Retirement benefits schemes: life policy assigned: terms of pension scheme

On a change of employment there are normally three ways (apart from the return of the employee’s contributions) in which the trustees of a pension scheme or fund based on life assurance policies can discharge their obligations to the employee who is leaving.

  • The employee may be given a paid-up policy, or
  • the policy may be assigned to the employee, who may then continue to pay the premiums himself, or
  • the policy may be assigned to a new employer who may be willing to take over the policy (and the obligation to pay the benefit) and continue paying the premiums.Unless the employee (or, in the third case, the new employer) gives actual consideration (or consideration in money or money’s worth if the disposal was before 9 April 2003) for the gift or assignment, a gain on disposal of the rights under the policy is not a chargeable gain - see CG69040 onwards. For this purpose, the cancellation or transfer of obligations under the policy should not be regarded as actual consideration (or, before 9 April 2003, as consideration in money or money’s worth).