Finance Act 2004

Authorised employer payments

175 Authorised employer payments

The only payments which a registered pension scheme that is an occupational pension scheme is authorised to make to or in respect of a sponsoring employer are—

(a) public service scheme payments (see section 176),

(b) authorised surplus payments (see section 177),

(c) compensation payments (see section 178),

(d) authorised employer loans (see section 179),

(e) scheme administration employer payments (see section 180), and

(f) payments of a description prescribed by regulations made by the Board of Inland Revenue.

176 Public service scheme payment

A payment is a public service scheme payment if—

(a) it is made by a public service pension scheme, and

(b) it is not of a description prescribed by regulations made by the Board of Inland Revenue.

177 Authorised surplus payment

For the purposes of this Part a payment is an authorised surplus payment if it is of a description prescribed by regulations made by the Board of Inland Revenue.

178 Compensation payments

A payment is a compensation payment if it is made in respect of a member’s liability to a sponsoring employer in respect of a criminal, fraudulent or negligent act or omission by the member.

179 Authorised employer loan

(1) A loan made to or in respect of a sponsoring employer is an authorised employer loan if—

(a) the amount loaned does not exceed an amount equal to 50% of the aggregate of the amount of the sums, and the market value of the assets, held for the purposes of the pension scheme immediately before the loan is made,

(b) the loan is secured by a charge which is of adequate value, and

(c) the repayment terms comply with subsection (2).

(2) The repayment terms comply with this subsection if—

(a) the rate of interest payable on the loan is not less than the rate prescribed by regulations made by the Board of Inland Revenue,

(b) the loan repayment date is before the end of the period of five years beginning with the date on which the loan is made, or has been postponed to a date after the end of that period under subsection (3), and

(c) the amount payable in each period beginning with the date on which the loan is made, and ending with the last day of a loan year, is not less than the required amount.

(3) If on a standard loan repayment date any amount (including interest) is owing, the loan repayment date may be postponed to a date before the end of the period of five years beginning with the standard loan repayment date.

(4) The loan repayment date may be postponed under subsection (3) only once.

(5) If the amount of a loan to or in respect of a sponsoring employer is increased, the amount of the increase is to be treated as a loan made on the date of the increase.

(6) Schedule 30 gives the meaning of expressions used in this section and explains how to calculate the amount of the unauthorised payment when a loan to or in respect of a sponsoring employer does not comply with subsection (1).

(7) In this section and that Schedule “charge” includes a right in security or an agreement to create a right in security; and any reference to assets subject to a charge or assets charged includes a reference to the property over which such a right is granted.

(8) Schedule 36 contains (in Part 4) transitional provision about loans to sponsoring employers.

180 Scheme administration employer payments

(1) A “scheme administration employer payment” is a payment made—

(a) by a registered pension scheme that is an occupational pension scheme, and

(b) to or in respect of a sponsoring employer,

for the purposes of the administration or management of the pension scheme.

(2) But if a payment falling within subsection (1) exceeds the amount which might be expected to be paid to a person who was at arm’s length, the excess is not a scheme administration employer payment.

(3) Scheme administration employer payments include in particular—

(a) the payment of wages, salaries or fees to persons engaged in administering the pension scheme, and

(b) payments made for the purchase of assets to be held for the purposes of the pension scheme.

(4) A loan to or in respect of a sponsoring employer is not a scheme administration employer payment.

(5) Payments made to acquire shares in a sponsoring employer are not scheme administration employer payments if, when the payment is made—

(a) the market value of shares in the sponsoring employer held for the purposes of the pension scheme is equal to or greater than 5% of the aggregate of the amount of the sums, and the market value of the assets, held for the purposes of the pension scheme, or

(b) the total market value of shares in sponsoring employers held for the purposes of the pension scheme is equal to or greater than 20% of the aggregate of the amount of the sums, and the market value of the assets, held for the purposes of the pension scheme.

(6) Regulations made by the Board of Inland Revenue may provide that payments of a description specified in the regulations are, or are not, scheme administration employer payments.