http://www.legislation.gov.uk/id/ukpga/2004/12/part/4/chapter/3

A registered pension scheme is not authorised to borrow an amount in respect of a money purchase arrangement unless the arrangement borrowing condition is met.

2

The arrangement borrowing condition is met if—

(APB + PB) < \frac{VA}{2}

where—

APB is the aggregate of the amounts previously borrowed in respect of the arrangement (excluding any amounts which have been repaid),

PB is the amount proposed to be borrowed in respect of the arrangement, and

VA is the value of the arrangement.

3

The value of the arrangement is the aggregate of—

a

the amount of such of the sums and the market value of such of the assets as represent the F3member's drawdown pension fund in respect of the arrangement (if any),

b

the amount of such of the sums and the market value of such of the assets as represent F2dependants' drawdown pension funds in respect of the arrangement (if any),

c

the aggregate of the value of each scheme pension or dependants' scheme pension payable in respect of the arrangement, and

d

the value of the uncrystallised rights under the arrangement.

4

The value of a scheme pension or dependants' scheme pension payable in respect of the arrangement is—

RVF \times ARP

where—

RVF is the relevant valuation factor (see section 276), and

ARP is the annual rate at which the pension is payable.

5

Rights are uncrystallised if no-one has become entitled to the present payment of benefits in respect of the rights; and a person is to be treated as entitled to the present payment of benefits in respect of the sums and assets representing the person’s F1drawdown pension fund.

6

If the arrangement is a cash balance arrangement, the value of the uncrystallised rights under the arrangement is the amount which would, on the valuation assumptions (see section 277), be available for the provision of benefits in respect of those rights if a person became entitled to benefits in respect of those rights.

7

If the arrangement is a money purchase arrangement other than a cash balance arrangement, the value of the uncrystallised rights under the arrangement is the aggregate of the amount of such of the sums, and the market value of such of the assets, held for the purposes of the arrangement as represent those rights.

8

If the arrangement is a hybrid arrangement under which either cash balance benefits or other money purchase benefits (but not defined benefits) may be provided, the value of the uncrystallised rights under the arrangement is the greater of—

a

their value calculated under subsection (6) (on the assumption that cash balance benefits are provided), and

b

their value calculated under subsection (7) (on the assumption that other money purchase benefits are provided).

I2 C1 C3183Effect of unauthorised borrowing: money purchase arrangements

1

Subsection (2) applies if a registered pension scheme borrows in respect of a money purchase arrangement an amount which it is not authorised to borrow under section 182.

2

The pension scheme is to be treated as having made a scheme chargeable payment—

a

if subsection (3) applies, of an amount calculated in accordance with subsection (4), and

b

otherwise, of the amount borrowed.

3

This subsection applies if, immediately before the amount is borrowed—

APB < \frac{VA}{2}

4

If subsection (3) applies, the amount of the scheme chargeable payment is—

APB + AB - \frac{VA}{2}

5

In subsections (3) and (4)—

APB is the aggregate of the amounts previously borrowed in respect of the arrangement (excluding any amounts which have been repaid),
AB is the amount borrowed, and
VA is the value of the arrangement, calculated in accordance with section 182(3), immediately before the amount is borrowed.

I4 C1184Unauthorised borrowing: other arrangements

1

A registered pension scheme is not authorised to borrow an amount in respect of any arrangement which is not a money purchase arrangement unless the scheme borrowing condition is met.

2

The scheme borrowing condition is met if—

(APB + PB) < \frac{AARA}{2}

where—

APB is the aggregate of the amounts previously borrowed by the pension scheme in respect of arrangements which are not money purchase arrangements (excluding any amounts which have been repaid),

PB is the amount proposed to be borrowed by the pension scheme, and

AARA is the aggregate amount of the relevant sums and assets.

3

The aggregate amount of the relevant sums and assets is the aggregate of—

a

the amount of the sums held for the purposes of such of the arrangements under the pension scheme as are not money purchase arrangements, and

b

the market value of the assets held for the purposes of such of the arrangements under the pension scheme as are not money purchase arrangements.

I1 C1185Effect of unauthorised borrowing: other arrangements

1

Subsection (2) applies if a registered pension scheme borrows, in respect of an arrangement which is not a money purchase arrangement, an amount which it is not authorised to borrow under section 184.

2

The pension scheme is to be treated as having made a scheme chargeable payment—

a

if subsection (3) applies, of an amount calculated in accordance with subsection (4), and

b

otherwise, of the amount borrowed.

3

This subsection applies if, immediately before the amount is borrowed—

APB < \frac{AARA}{2}

4

If subsection (3) applies, the amount of the scheme chargeable payment is—

APB + AB - \frac{AARA}{2}

5

In subsections (3) and (4)—

APB is the aggregate of the amounts previously borrowed by the pension scheme in respect of arrangements which are not money purchase arrangements (excluding any amounts which have been repaid),
AB is the amount borrowed, and
AARA is the aggregate amount of the relevant sums and assets, calculated in accordance with section 184(3), immediately before the amount is borrowed.

C5C13C14C11C10C2C9C8C4C12Part 4Pension schemes etc

C12Chapter 3Payments by registered pension schemes

Borrowing

I3C1C6C7182Unauthorised borrowing: money purchase arrangements

1

2

3

a

b

c

d

4

5

6

7

8

a

b

I2C1C3183Effect of unauthorised borrowing: money purchase arrangements

1

2

a

b

3

4

5

I4C1184Unauthorised borrowing: other arrangements

1

2

3

a

b

I1C1185Effect of unauthorised borrowing: other arrangements

1

2

a

b

3

4

5

C5 C13 C14 C11 C10 C2 C9 C8 C4 C12Part 4Pension schemes etc

I3 C1 C6 C7182Unauthorised borrowing: money purchase arrangements

I2 C1 C3183Effect of unauthorised borrowing: money purchase arrangements

I4 C1184Unauthorised borrowing: other arrangements

I1 C1185Effect of unauthorised borrowing: other arrangements