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HMRC internal manual

Pensions Tax Manual

HM Revenue & Customs
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Other authorised payments: essential principles

Glossary PTM000001

Authorised member payments
Authorised employer payments
Scheme administration payments
Genuine errors

Authorised member payments

Authorised payments that are benefits

There are rules governing benefit payments by a registered pension scheme to a member; referred to as the pension rules and the lump sum rule (see PTM061000).

There are also rules governing payments made by a registered pension scheme following the death of a member referred to as the pension death benefit rules and the lump sum death benefit rule (see PTM071000).

If the benefit or payment does not meet all conditions for it to be covered by one of the ‘rules’ mentioned above it will be an unauthorised member payment and be taxed as such (see PTM132000) - unless it meets the conditions of any of the other authorised member payments.

Other authorised member payments

The following are also authorised member payments:

  • a recognised transfer from one registered pension scheme to another, or to a qualifying recognised overseas pension scheme (see PTM100010).
  • a scheme administration member payment (see below)
  • payments related to a pension sharing order, such as on divorce (see PTM029000).
  • short service refunds (see PTM044210).
  • payments which are the subject of specific regulations. See PTM142000 for a full list, which includes:

    • small lump sums
    • Payment Protection Fund transfers
    • pre-6 April 2006 transitional issues and
    • arrears and errors.

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Authorised employer payments

The sponsoring employer is permitted to enter into most transactions with a registered pension scheme, for example purchasing or selling an asset to or from the pension scheme. Any such transaction must be done on an arm’s length commercial basis, otherwise the excess will be an unauthorised payment and the employer will be liable to an unauthorised payments charge.

There are also restrictions on investments relating to the sponsoring employer, including ownership of shares - see PTM122000, and loans.

There are specific restrictions on certain types of payments made to or in respect of a sponsoring employer or former sponsoring employer. Find more details at PTM145000 for:

  • public service scheme payments
  • authorised surplus payments
  • compensation payments
  • authorised employer loans
  • scheme administration employer payments (see below).

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Scheme administration payments

A pension scheme might make payments to or in respect of a member or sponsoring employer purely for administration or management of the scheme. These are general administration costs of running the scheme that are required whether or not they happen to be paid to the member or employer. The sort of things involved might be:

  • the payment of wages, salaries, fees to persons involved in the administration of the scheme (such as scheme administrator, lawyers, advisors), and
  • payments relating to the purchase of scheme assets (such as property purchase costs).

These are authorised payments under pensions tax rules if certain conditions are met.

Specific treatment is given to interest on refunded contributions, rebated commission and certain compensation payments in the case of scheme administration member payments. See PTM143000.

For details of scheme administration employer payments see PTM144000.

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Genuine errors

Trustees and administrators sometimes make mistakes in dealing with pension funds and payments. Such payments made in error, or to rectify errors, might not fall within the authorised payments conditions and so be subject to unauthorised payments charges. Specific rules apply so that in certain circumstances errors can be treated as authorised payments (see PTM146000).