The Social Security (Contributions) Regulations 2001

PART VI PENSIONS AND PENSION CONTRIBUTIONS

Pension payments and pension contributions to be disregarded

1.  A payment by way of a pension is disregarded in the calculation of an employed earner’s earnings, as are the payments mentioned in paragraphs 2 to 7.

Personal pension contributions by employers

2.  A payment by way of an employer’s contribution towards a personal pension which, by virtue of section 643(1) of the Taxes Act (employers' contributions under personal pension arrangements)(1), is not to be regarded as an emolument of the employment chargeable to tax under Schedule E.

Approved schemes, relevant statutory schemes, pilots' benefit funds and schemes established by overseas governments

3.  A payment—

(a) to which section 595 of the Taxes Act (charge to tax in respect of certain sums paid by an employer pursuant to a retirement benefit scheme)(2) does not apply by virtue of section 596(1) or (2)(b) of that Act(3);

(b) to a pilot’s benefit fund under section 607 of that Act(4);

(c) to which section 608 of that Act (superannuation funds approved before 6th April 1980) applies; or

(d) by way of any benefit pursuant to a scheme or fund falling within sub-paragraph (a), (b) or (c).

Funded unapproved retirement benefit schemes.

4.  A payment by way of relevant benefits pursuant to a retirement benefits scheme which has not been approved by the Board for the purposes of Chapter I of Part XIV of the Taxes Act and attributable to payments prior to 6th April 1998.

Here “relevant benefits” has the meaning given in section 612 of the Taxes Act.

Payments to pension previously taken into account in calculating earnings

5.  A payment by way of any benefit pursuant to a retirement benefits scheme which has not been approved by the Board for the purposes of Chapter I of Part XIV of the Taxes Act and attributable to payments on or after 6th April 1998 which have previously been included in a person’s earnings for the purpose of the assessment of his liability for earnings-related contributions.

Payments in good faith to scheme solely for providing approved benefits.

6.—(1) A payment made in respect of a scheme which is established in good faith for the sole purpose of providing relevant benefits where at the time of the payment the conditions specified in sub-paragraphs (2) to (4) are satisfied and, if appropriate, the additional conditions in sub-paragraph (5) and (6) are satisfied.

(2) The first condition is that an application has been made to the Board in accordance with section 604 of the Taxes Act(5) and has not been rejected.

(3) The second condition is that the payment represents contributions in respect of an employed earner’s earnings not in excess of the permitted maximum in force at the time when the payment is made.

(4) The third condition is that the terms of the scheme do not permit any pension payable under it, in whole or in part, to be surrendered, commuted or assigned except in so far as to allow an employed earner on his retirement to obtain, by commutation of his pension, a lump sum or sums not exceeding in all 3/80ths of his final remuneration for each year of service up to a maximum of 40.

(5) The first additional condition is that if the scheme is connected with another scheme or schemes each of which is an approved scheme, the amount payable by way of pension or commuted pension under the scheme will not, when aggregated with any amount payable by way of pension or commuted pension under the other scheme or schemes exceed the relevant amount.

(6) The second additional condition is that if the scheme is a small self-administered scheme—

(a) the requirements of regulation 9 of the Retirement Benefits Schemes (Restrictions on Discretion to Approve) (Small Self-administered Schemes) Regulations 1991 (independent pensioner trustees)(6) have been satisfied; and

(b) regulation 3 of those Regulations (restriction on the Board’s discretion to approve) does not apply.

(7) In this paragraph—

(a) “permitted maximum” is the amount for the time being specified in an order made under section 590C(6) of the Taxes Act (earnings cap)(7);

(b) “relevant amount” shall be determined—

(i) in the case of a pension which is not a commuted pension, in accordance with the provisions of section 590B(3) and (7) to (11) of the Taxes Act (further supplementary provisions in respect of approval of retirement benefit schemes)(8); and

(ii) in the case of a pension which is a commuted pension, in accordance with the provisions of section 590B(4) and (7) to (11) of that Act;

(c) “relevant benefits” has the meaning given in section 612 of the Taxes Act;

(d) “small self-administered scheme” has the meaning given in regulation 2(1) of the Retirement Benefits Schemes (Restrictions on Discretion to Approve) (Small Self-administered Schemes) Regulations 1991; and

(e) whether or not a scheme is connected with another shall be determined in accordance with section 590A(2) to (4) of the Taxes Act (supplementary provisions in respect of approval of retirement benefit schemes)(9).

Pensions exempt from UK taxation under double taxation agreements

7.—(1) A payment to a pension scheme which is afforded relief from taxation by virtue of—

(a) Article 25(8) of the Convention set out in the Schedule to the Double Taxation Relief (Taxes on Income) (France) Order 1968(10);

(b) Article 17A of the Convention set out in the Schedule to the Double Taxation Relief (Taxes on Income) (Republic of Ireland) Order 1976(11);

(c) Article 28(3) of the Convention set out in the Schedule to the Double Taxation Relief (Taxes on Income)(Denmark) Order 1980(12).

(2) For the purposes of sub-paragraph (1)(b), Article 17A of the Order shall be read as if “or is being considered for approval” were omitted.

(1)

There are amendments to section 643 that are not relevant for the purposes of this instrument.

(2)

Section 595 was amended by paragraph 7 of Schedule 6 to the Finance Act 1989 (c. 26).

(3)

Section 596 was amended by paragraph 8 of Schedule 6 to the Finance Act 1989.

(4)

Section 607 was amended by section 104(2) of the Finance Act.

(5)

Section 604 was amended by paragraph 3 of Schedule 15 to the Finance Act 1998.

(6)

S.I. 1991/1614 Regulation 9 was substituted by regulation 9 of S.I. 1998/728 and amended by regulation 6 of S.I. 1998/1315.

(7)

Section 590C was inserted by paragraph 4 of Schedule 6 to the Finance Act 1989.

(8)

Section 590B was inserted by paragraph 4 of Schedule 6 to the Finance Act 1989 and amended by section 107(6) of the Finance Act 1993 (c. 34).

(9)

Section 590A was inserted by paragraph 4 of Schedule 6 to the Finance Act 1989.

(10)

S.I. 1968/1869: paragraph (8) was added to Article 25 by Article 16 of the Protocol set out in the Schedule to S.I. 1987/2055.

(11)

S.I. 1976/2151: Article 17A was added by Article 1 of the Protocol set out in the Schedule to S.I. 1995/764.

(12)

S.I. 1980/1960: Paragraph (3) was substituted by Article X(2) of the Protocol set out in Part I of the Schedule in S.I. 1996/3165.