Chapter PTM133860
| Published date | 27 March 2015 |
| Record Number | PTM133860 |
| Court | HM Revenue & Customs |
| Issuer | HM Revenue & Customs |
| Glossary | PTM000001 |
Please note that the examples are just that - examples. The list is not and cannot be comprehensive. At the end of the day, each case will have to be decided on its own facts and merits to establish whether or not all of the requirements set out in the bullet points at PTM133810 have been met. It is only where they have all been met that recycling will have occurred.
Example 1 - Change of employee contribution level on moving to new employer
After 20 years, an individual leaves Employer A and takes a pension commencement lump sum from Employer A’s registered pension scheme. During the membership of that pension scheme as an employee, the individual was not required to make any contributions and nor did the individual ever make any voluntary contributions to his employer’s scheme or any other private pension contributions to another registered pension scheme. Apart from the benefits from Employer A, the individual has no other pension saving.
Before leaving Employer A, the individual applied for and got another job with Employer B, who has a registered pension scheme to which that individual would have to pay contributions as a condition of membership. On leaving Employer A, the individual takes up the job with Employer B and joins Employer B’s pension scheme, as intended.
As the individual is simply paying contributions out of that individual’s salary from Employer B in the ordinary course of the membership of Employer B’s pension scheme, the contributions are not significantly greater than might have been expected.
Example 2 - Consistent basis of contributions with fluctuating salary levels
A member’s annual contributions to registered pension schemes have fluctuated in the 5 years (years 1 to 5) leading up to the year in which the member takes a pension commencement lump sum (year 6). The contributions in year 6 are £15,000, which is an increase of more than 30% on the previous year’s contributions of £10,000 (£10,000 + 30% = £13,000).
However, although the member’s contributions in years 1 to 5 have fluctuated, the basis on which they were calculated has not changed. The contributions were based on a set percentage of the member’s salary, which has, itself, fluctuated because that salary includes bonus payments on the following basis:
Year 1 - bonus paid
Year 2 - bonus paid
Year 3 - no bonus paid
Year 4 - bonus paid
Year 5 - no bonus paid
Year 6 - bonus paid.
Although the member’s contributions have increased...
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