Scheme administration employer payment definition

View the related practice notes about Scheme administration employer payment

Authorised and unauthorised payments

Authorised payments v unauthorised paymentsA pension scheme that has registered with HMRC benefits from favourable UK tax treatment. Broadly, this means that any income and gains arising in the hands of the UK registered pension scheme on its investment activities is exempt from UK taxation. For members, a registered pension scheme represents a tax efficient investment vehicle to provide for an income in retirement, subject to the existence of various pensions allowances (eg the annual allowance) which place limits on the tax-efficiency of pensions. For further information, see: Pensions allowances—overview.A UK registered pension scheme must satisfy certain conditions. Among other things, on registration, the scheme administrator must confirm that the pension scheme meets all the criteria to be registered as a pension scheme under the Finance Act 2004 (FA 2004). Importantly, as part of this, the scheme must confirm that the ‘instruments or agreements’ by which the pension scheme is established do not entitle any person to unauthorised payments. For information on the registration requirements, see Practice Note: Registration of...

Tax treatment of pension overpayments

Pension schemes sometimes make payments to members that are not in accordance with scheme rules or that may breach other tax or legal regulations. As pensions is a complex area, understandably, incorrect payments may be made, commonly in the form of overpayments.Trustees are compelled to recover as much of these overpayments as reasonably possible—for more information, see Practice Note: Overpayment of pension benefits.Overpayments can lead to tax consequences for members, schemes and employers if they are considered to be ‘unauthorised payments’.Are overpayments unauthorised member payments?An unauthorised member payment is effectively a payment to a member which falls outside the authorised member payment rules set out in section 164 of the Finance Act 2004 (FA 2004). For more information on authorised payments generally, see Practice Note: Authorised and unauthorised payments.An overpayment will be an unauthorised member payment, unless it falls within:•an exception set out in the Registered Pension Schemes (Authorised Payments) Regulations 2009, SI 2009/1171 (the Authorised Payment Regs)—for more information, see Exceptions under the Authorised Payment Regs, below•the ‘genuine error’...