Contracting out of the State Second Pension through a money purchase pension scheme was abolished with effect from 6 April 2012. New pensions legislation comes into force on 8 August 2012 which relates to these former contracted-out money purchase schemes.

The new regulations allow certain schemes to make payments of a newly specified description as 'authorised payments' for tax purposes. In the absence of these new rules pension scheme administrators and members could become liable for unauthorised payments tax charges on certain payments made from 6 April 2012 onwards. There are a number of conditions that must be met before the payment is an authorised payment. Those conditions are the same or similar to those that apply for the purposes of the short service refund lump sum rule.