From minimum pension age, members can enjoy their pension scheme benefits. They must take these benefits between the ages of 55 (prior to 6 April 2010, age 50) and 75. It is the earliest date at which a member can take retirement benefits, other than on grounds of ill-health.
Normal minimum pension age (NMPA)Normal minimum pension age is the earliest age at which members may ordinarily take their benefits (other than ill-health benefits) as authorised member payments under a registered pension scheme. Normal minimum pension age is currently 55. From 6 April 2028, it will increase to age 57, (see Practice Note: Increase in normal minimum pension age to 57 from 6 April 2028 below).Normal minimum pension age was 50 until 5 April 2010. Where members started to take their benefits after reaching the normal minimum pension age of 50 before 6 April 2010 but they were not yet 55 at that date, those benefits could still continue to be paid after 6 April 2010 as authorised payments.Members can only take their benefits before normal minimum pension age as authorised member payments if they:•meet the statutory ill health condition—for further information, see Ill-health early retirement—interpreting the scheme rules—Post A-day—Ill-health condition, or•have a protected pension age. Until 5 April 2028, the only form of protection available is the 2010 protected pension age—for further information, see What is a 2010 protected pension age?, belowOtherwise, if schemes pay out benefits to members before normal minimum pension age, those payments will be unauthorised member payments and will incur punitive tax charges on
THIS PRACTICE NOTE APPLIES ONLY TO OCCUPATIONAL PENSION SCHEMESA-day—an overviewThe Finance Act 2004 (FA 2004), which came into force on 6 April 2006 (A-day), introduced a new, simplified regime for the taxation of pension schemes in the UK.Prior to A-day, pension schemes needed to be exempt approved by the Inland Revenue, now Her Majesty's Revenue and Customs ( HMRC), in order to benefit from favourable tax treatment. To qualify for and maintain exempt approved status, the maximum benefits that could be paid by schemes were restricted in accordance with limits set by HMRC (the HMRC Limits).For more information, see The pre A-day pensions tax regime.The Finance Act 2004 abolished the system of tax approval and instead required pension schemes to be registered with HMRC. It also introduced a single, more flexible, tax regime for pension schemes. The main features are:•pension schemes are no longer required to apply HMRC Limits or the 'earnings cap' to members’ benefits, although the trustees and/or employer could choose to do
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In a scheme with salary sacrifice, what options are available to employers wanting to pay contribution refunds to early leavers with no short service benefit? This Q&A assumes the scheme in question is an occupational pension scheme. No short service refund lump sum option Since A-day (6 April 2006), trustees of registered occupational pension schemes have been legally obliged to give early leavers with no right to a short service benefit but with at least three months' pensionable service, the right to choose between: • a refund of member contributions known as a 'short service refund lump sum'. This is a type of authorised member payment, and • a cash transfer sum. This is the cash equivalent of an early leaver's accrued benefits (taking account of both member and employer considerations), which can either be used to buy an annuity or paid into a registered pension scheme A short service refund lump sum is limited to the amount of contributions actually paid by a member. Even in the context of legislation applying to early leavers, the term 'member contributions' (which is referred to in legislation as 'employee contributions') is defined under the Pension Schemes Act 1993, s 101AB(5), as 'contributions made to the scheme by or on behalf of the member on his own account'. The lump sum cannot therefore include any employer contributions paid in respect of the member without incurring
If a Funded Unapproved Retirement Benefits Scheme which became an Employer-Financed Retirement Benefits Scheme on A-day provided for the payment of benefits at age 50, can those benefits still be taken at age 50 or do they have to be taken at age 55? We refer you to Practice Note: Retirement schemes for executives—UURBS, FURBS and EFRBS. As mentioned in that Practice Note, Funded Unapproved Retirement Benefits Scheme which became funded Employer-Financed Retirement Benefits Scheme (EFRBS) on A-day continued to enjoy certain tax advantages following A-day. This includes, among other things, the fact that payments of benefits out of an EFRBS are not subject to National Insurance Contributions
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This week’s edition of Private Client highlights includes: (1) The Treasury publishes the outcome of its consultation on the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017; (2) The Breathing Space Scheme, which aims to help individuals with problem debt; (3) The Charity Commission opens a consultation on Annual Return 2023-25 revisions; (4) The Department of Work and Pensions’ consultation on helping savers understand their pension choices; (5) Elaine Curtis v HMRC, in which the First-tier tribunal held that the taxpayer should not owe taxes on a £20,000 loan connected to a pension fund transfer because she could not have known the illicit nature of the transaction, and (6) Representation of White Willow (Trustees) Limited and Trilogy Management Limited, in which the Royal Court of Jersey reaffirmed a trustee's broad right to an indemnity as reasonable security when making an interim distribution to beneficiaries.
Welcome to the Pensions weekly highlights from the Pensions team. This week's edition of Pensions highlights includes a review of key news stories, as well as dates for your diary and trackers.
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