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Authorised payments v unauthorised payments

A Pension scheme that has registered with HMRC benefits from favourable UK tax treatment. Broadly, this means that any income and gains arising in the hands of the UK registered pension scheme on its investment activities is exempt from UK taxation. For members, a registered pension scheme represents a tax efficient investment vehicle to provide for an income in retirement, subject to the existence of various pensions allowances (eg the annual allowance) which place limits on the tax-efficiency of pensions. For further information, see: Pensions allowances—overview.

A UK registered pension scheme must satisfy certain conditions. Among other things, on registration, the Scheme administrator must confirm that the pension scheme meets all the criteria to be registered as a pension scheme under the Finance Act 2004 (FA 2004). Importantly, as part of this, the scheme must confirm that the ‘instruments or agreements’ by which the pension scheme is established do not entitle any person to unauthorised payments. For information on the registration requirements, see Practice Note: Registration