SCHEDULES
C1SCHEDULE 28Registered pension schemes: authorised pensions—supplementary
Part 1Pension rules
Scheme pension
F12A
1
Where this paragraph applies in relation to a pension payable to the member, the pension scheme is to be treated as making an unauthorised payment to the member of the appropriate amount.
2
This paragraph applies to a pension if it fails to satisfy the condition in sub-paragraph (3) of paragraph 2—
a
by reason of not complying with paragraph (a) of that sub-paragraph, or
b
by reason of not complying with paragraph (b) of that sub-paragraph because a substantial reduction occurs in the rate of the pension,
or if it is a pension F2which is reduced in accordance with paragraph (a) of sub-paragraph (4) of paragraph 2, or the rate of which is reduced in accordance with paragraph (b) of that sub-paragraph, and the reduction is part of avoidance arrangements.
3
For the purposes of sub-paragraph (2)(b) a substantial reduction occurs in the rate of a pension if the rate at which the pension is payable at any time during any relevant 12 month period (within the meaning of paragraph 2(7)) is less than 80% of the rate payable when the member became entitled to the pension.
F33A
But for the purposes of sub-paragraph (2)(b), no substantial reduction occurs in the rate of a pension if—
a
the pension is payable in respect of a collective money purchase arrangement, and
b
the reduction is in accordance with the rules of the scheme.
4
For the purposes of sub-paragraph (2) “avoidance arrangements” includes schemes, arrangements and understandings of any kind (whether or not legally enforceable) the main purpose, or one of the main purposes, of which is to increase the member's entitlement to a lump sum on which there is no liability to income tax.
5
“The appropriate amount”, in relation to the pension, is the amount of any lump sum on which there is no liability to tax to which the member became entitled in connection with the pension.
6
Once this paragraph has applied in relation to the pension, it does not apply in relation to it again.
7
The application of this paragraph in relation to the pension does not prevent any payments of the pension themselves being unauthorised member payments.
Sch. 28 modified by The Pensions Schemes (Application of UK Provisions to Relevant Non-UK Schemes) Regulations 2006 (S.I. 2006/207), regs. 1(1), 14 (as substituted (with effect in accordance with reg. 1(2) of the amending S.I.) by S.I. 2012/1795, regs. 1(1), 5)