Unauthorised payments—exceptions
Produced in partnership with Mark Smith and Georgina Wardrop of Taylor Wessing LLP and Martin Scott of gunnercooke LLP

The following Pensions practice note produced in partnership with Mark Smith and Georgina Wardrop of Taylor Wessing LLP and Martin Scott of gunnercooke LLP provides comprehensive and up to date legal information covering:

  • Unauthorised payments—exceptions
  • Exceptions in special circumstances
  • HMRC guidance on genuine errors
  • ‘Payments’ that are not unauthorised payments
  • Inadvertent unauthorised payments: pension instalments or lump sums not exceeding £250 in total that are unauthorised payments
  • Member or employer ‘contributions’ to pension schemes that are not contributions
  • The Authorised Payments Regulations
  • Pensions paid in error
  • Pensions paid after the discovery of error
  • Pensions continuing to be paid after death
  • More...

Unauthorised payments—exceptions

There are no limits on the benefits that may be provided by a registered pension scheme. However, under the Finance Act 2004 (FA 2004) if a scheme makes an unauthorised payment, tax charges will arise on both the recipient and the scheme unless the payment falls under certain exceptions (although individuals and companies can apply to HMRC for discharge from the tax charges in certain circumstances).

For further information, see Authorised and unauthorised payments and Unauthorised payments: tax charges and reporting requirements.

Exceptions in special circumstances

There are occasions on which pension schemes make errors which result in unauthorised payments being made. There are also occasions on which making an unauthorised payment may be necessary to treat a beneficiary fairly.

For this reason, there are a number of exceptions to the usual rules in relation to unauthorised payments. The main exceptions are set out in:

  1. HMRC guidance on genuine errors (contained in the Pensions Tax Manual (PTM))

  2. the Registered Pension Schemes (Authorised Payments) Regulations 2009 (the “Authorised Payments Regulations”)

HMRC guidance on genuine errors

HMRC guidance provides that, in certain circumstances, an inadvertent payment caused by a genuine error would not be regarded as an unauthorised payment or a contribution into the scheme, as the case may be.

The main exceptions to the general rules about unauthorised payments provided for under the guidance cover:

  1. ’payments’ that are not

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