Introduction Background
7.A pension from a registered pension scheme is not normally allowed to be reduced when in payment.
8.There are some exceptions to this rule, one of which is where a ‘bridging pension’ is being paid.
9.A ‘bridging pension’ is the term used to describe a pension that is higher at the outset and then reduced at the age at which the individual can claim for the state pension.
10.If a pension is reduced at any time other than when permitted under paragraph 2(4) Schedule 28 FA 2004, all future payments of that pension are unauthorised payments and subject to the unauthorised payments tax charges.
11.The existing legislation meant that the bridging pension had to be reduced by the age of 65. However, changes to the age at which state pension is paid meant that this reduction might occur before the member could receive their state pension.
12.The changes made by this section will mean that pension schemes can continue to pay a bridging pension up to a member’s state pension age without incurring unauthorised payments tax charges. The legislation will remain in line with the policy intention.
13.The Government announced at Budget 2012 that changes would be introduced with effect from 6 April 2013 to align tax rules with changes to state pension age being introduced by the Department for Work and Pensions.