Since 6 April 2006, schemes have been wrestling with the
complexities of aspects of the new pensions tax regime under
the Finance Act 2004. This LawNow focuses on two such areas,
overpayments and trivial commutation lump sums, in relation to
which draft Regulations issued by HMRC aim to create new
categories of "authorised payment" to allow schemes
more flexibility.
Overpayments
From A-Day, any payment made by a registered pension scheme
to a member which is not expressly authorised by the Act is
treated as unauthorised and subject to punitive tax treatment
(attracting an initial charge to tax of 40%, as well as other
potential charges). Although HMRC published subsequent guidance
to give limited relief in relation to "genuine
errors", this only applies to sums up to £250.
Otherwise, there is no discretion for a mistaken payment to be
treated in the same way as other payments of pension or lump
