Tax treatment of pension overpayments

Published by a UU��ֱ�� Pensions expert

Practice notes

Tax treatment of pension overpayments

Published by a UU��ֱ�� Pensions expert

Practice notes

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

Jurisdiction(s):

United Kingdom

Key definition:

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A document setting out information on the economy and outlining the government's future tax plans. It is presented to the House of Commons each autumn by the Chancellor of the Exchequer. In addition to the Spring statement, it is one of the most important fiscal events in the tax year.

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