If a member was under age 60 and in receipt of a pension on 5 April 2006 and would have been entitled to a refund of contributions at age 60 then the scheme rules require that the lump sum that would have been paid under the old refund provisions should be paid at age 60 only to the extent that it would be an authorised payment.
GAD's understanding is that HM Revenue & Customs legislation fully describes the extent to which a payment may be an authorised payment so no further guidance is required.
GAD's understanding is that if the refund is not paid within 12 months of the pension coming into payment, in general only 25% of the refund may be taken as a tax free lump sum. The remaining 75% may be taken under the scheme rules as additional pension or as lump sum. If it is taken as lump sum, it is liable to tax at the rate of at least 40%.
If the lump sum is converted into pension, the excess amount of refund must be converted into a pension.
DoF has confirmed that we should assume no spouse's benefit applies to this pension, as, by definition, the member is unmarried.
The pension purchased is P, determined as follows:
P = LS / F60LS
Where:
LS is the amount of refund, after tax free cash
F60LS is the dependant's pension factor at age 60 from Table P1TCCL1 (Table 1-502 in the consolidated factors workbook). The table applies to both male and female members - i.e. the factors are unisex.
The pension, P, is payable to the member and will not affect any pension payable to a dependant on the member's death.
