Transfers: member and scheme administrator considerations for transfers between registered pension schemes
Most transfers are made at the request of the member. The circumstances where a transfer is not instigated by the member are limited to pension scheme reorganisations by the sponsoring employer(s) or scheme provider.
As the person requesting the transfer the member needs to be satisfied that the scheme that they want to transfer to meets their requirements and that they will not be liable to unwanted tax consequences.
If the transfer is not a recognised transfer (or a transfer to the Pension Protection Fund or Financial Assistance Scheme) it is an unauthorised payment. The member will be liable to tax on the amount transferred - see PTM134000 for more information about the tax due.
If the member has enhanced protection, fixed protection, fixed protection 2014, fixed protection 2016 or protection of a pension age below 55 the transfer may cause them to lose this protection. The relevant guidance is at:
- enhanced protection - see PTM092410,
- fixed protection, fixed protection 2014 and fixed protection 2016 - see PTM093400,
- protected pension age - see PTM062240.
If the member has scheme specific lump sum protection a transfer could either cause the member to lose that protection or reduce the amount of their protected lump sum. Guidance about the effect of transfer on scheme specific lump sum protection is at PTM063150.
Advice is available to members from a number of unbiased public sources such as gov.uk, The Pensions Advisory Service, the Money Advice Service and The Pensions regulator, see:
The member may also want to take independent financial advice before agreeing to make a transfer.
Scheme administrator considerations on transfer to a registered pension scheme
If the transfer is not a recognised transfer (see PTM100010) the transfer will be an unauthorised payment. The scheme administrator will be liable to the scheme sanction charge on the transfer - see PTM135000.
A scheme administrator can apply to HMRC to be discharged from the scheme sanction charge if both the following conditions are met:
- the scheme administrator reasonably believed that the unauthorised payment was not a scheme chargeable payment, and
- in all the circumstances of the case, it would not be just and reasonable for the scheme administrator to be liable to the scheme sanction charge in respect of the unauthorised payment.
PTM135400 explains the circumstances in which a scheme administrator may apply for discharge from the scheme sanction charge and when HMRC may consider such a discharge.
Before making a transfer the scheme administrator should have carried out reasonable checks in relation to the transfer as part of their due diligence. If HMRC considers that the scheme administrator has not carried out sufficient due diligence checks into the transfer they will not normally have met the conditions to be discharged from the scheme sanction charge.
There is no checklist of the acceptable due diligence requirements as each case will depend on the circumstances.
If a scheme administrator has any concerns about a proposed transfer they can write to HMRC to ask about the status of the receiving scheme. HMRC will issue one of two possible responses. The guidance on this process is published on gov.uk at https://www.gov.uk/pension-administrators-member-transfers.
Receipt of ‘response 1’ from HMRC will not automatically mean that the scheme administrator may be discharged from liability to the scheme sanction charge. The scheme administrator may have other information available to them that indicates that the transfer would not meet the conditions to be a recognised transfer.