Income and Corporation Taxes Act 1988

638 Other restrictions on approval. U.K.

(1) M1 The Board shall not approve a personal pension scheme unless they are satisfied that there is a person resident in the United Kingdom who will be responsible for the management of the scheme.

(2) The Board shall not approve a personal pension scheme unless it makes such provision for the making, acceptance and application of transfer payments as satisfies any requirements imposed by or under regulations made by the Board.

(3) M2 The Board shall not approve a personal pension scheme unless it makes provision, in relation to arrangements made in accordance with the scheme, for ensuring that—

(a) the aggregate amount of the contributions that may be made in a year of assessment by the member and an employer of his under the arrangements, together with the aggregate amounts of such contributions under other approved personal pension arrangements made by that member, does not exceed [F1 the earnings threshold for that year or, if greater,] the permitted maximum for that year; and

(b) any excess is repaid to the member of the extent of his contributions and otherwise to his employer.

(4) In subsection (3) above “the permitted maximum” for a year of assessment means an amount equal to F2 . . . —

(a) the relevant percentage of the member’s net relevant earnings for the year; F3 . . .

(b) F3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

and references in subsection (3) to contributions by the member do not include references to contributions treated by virtue of section 649(3) as paid by him.

(5) In subsection (4) above “the relevant percentage” means 17.5 per cent. or, in a case where section 640(2) applies, the relevant percentage there specified.

(6) M3 The Board shall not approve a personal pension scheme which permits the acceptance of contributions other than—

(a) contributions by members;

(b) contributions by employers of members;

(c) minimum contributions paid by the [F4 Board] under [F5 section 43 of the Pension Schemes Act 1993] or F6 . . . under [F7 section 39 of the Pension Schemes (Northern Ireland) Act 1993].

[F8 (7) The Board shall not approve a personal pension scheme which permits the acceptance of minimum contributions paid as mentioned in subsection (6)(c) above in respect of an individual’s service as director of a company, if his emoluments as such are within section 644(5).

[F9 (7A) The Board shall not approve a personal pension scheme unless it prohibits, except in such cases as may be prescribed by regulations made by the Board—

(a) the acceptance of further contributions, and

(b) the making of transfer payments,

after the date which is the member’s pension date in relation to the arrangements in question.]

[F10 (7B) Subsection (7A) above shall have effect subject to and in accordance with section 638ZA.]

(8) A personal pension scheme which permits the acceptance of minimum contributions paid as mentioned in subsection (6)(c) above in respect of an individual’s service in an office or employment to which section 645 applies may be approved by the Board only if—

(a) the scheme does not permit the acceptance of contributions from the individual or from the person who is his employer in relation to that office or employment; or

(b) at the time when the minimum contributions are paid the individual is not serving in an office or employment to which section 645 applies.]

[F11 (9) The Board may only approve a personal pension scheme if it prohibits the acceptance of contributions in any form other than—

(a) the payment of monetary sums; or

(b) the transfer, subject to the conditions in subsection (12) below, of eligible shares in a company;

and any reference in this Chapter to the payment of contributions includes a reference to the making of contributions in accordance with paragraph (b) above.

(10) For the purposes of this Chapter, the amount of a contribution made by way of a transfer of shares shall be the aggregate market value of the shares at the date of the transfer.

(11) For the purposes of subsection (9)(b) above, “eligible shares” means shares—

(a) which the member has exercised the right to acquire, or

(b) which have been appropriated to the member,

in accordance with the provisions of a savings-related share option scheme, an approved profit-sharing scheme or an employee share ownership plan.

(12) The conditions mentioned in subsection (9)(b) above are—

(a) in relation to shares which the member has exercised his right to acquire in accordance with the provisions of a savings-related share option scheme, that the transfer of the shares as contributions under the personal pension scheme takes place before the expiry of the period of 90 days following the exercise of that right;

(b) in relation to shares appropriated to the member in accordance with the provisions of an approved profit-sharing scheme or an employee share ownership plan, that the transfer of the shares as contributions under the personal pension scheme takes place before the expiry of the period of 90 days following the date when the member directed the trustees of the approved profit-sharing scheme or employee share ownership plan to transfer the ownership of the shares to him or, if earlier, the release date in relation to the shares.

(13) In this section—

• “approved profit-sharing scheme” has the same meaning as in section 186;

• “employee share ownership plan” has the same meaning as in Schedule 8 to the Finance Act 2000;

• “market value” shall be construed in accordance with section 272 of the M4 Taxation of Chargeable Gains Act 1992;

• “savings-related share option scheme” has the same meaning as in Schedule 9 (see paragraph 1(1) of that Schedule).]

Textual Amendments

F1 Words in s. 638(3)(a) inserted (with effect in accordance with Sch. 13 para. 13(6) of the amending Act) by Finance Act 2000 (c. 17), Sch. 13 para. 13(2) (with Sch. 13 Pt. 2)

F2 Words in s. 638(4) repealed (with effect in accordance with Sch. 13 para 13(7), Sch. 40 Pt. 2(4) Note 2 of the repealing Act) by Finance Act 2000 (c. 17), Sch. 13 para. 13(3)(a), Sch. 40 Pt. 2(4)

F3 S. 638(4)(b) and preceding word repealed (with effect in accordance with Sch. 13 para 13(7), Sch. 40 Pt. 2(4) Note 2 of the repealing Act) by Finance Act 2000 (c. 17), Sch. 13 para. 13(3)(b)(c), Sch. 40 Pt. 2(4)

F4 Word in s. 638(6)(c) substituted (25.2.1999 for specified purposes and 1.4.1999 otherwise) by Social Security Contributions (Transfer of Functions, etc.) Act 1999 (c. 2), s. 28(2)(a)(3), Sch. 1 para. 3 (with Sch. 8); S.I. 1999/527, art. 2(b), Sch. 2

F5 Words in s. 638(6)(c) substituted (7.2.1994) by Pension Schemes Act 1993 (c. 48), ss. 190, 193(2), Sch. 8 para. 20(3) (with ss. 6(8), 164); S.I. 1994/86, art. 2

F6 Words in s. 638(6)(c) repealed (1.4.1999) by The Social Security Contributions (Transfer of Functions, etc.) (Northern Ireland) Order 1999 (S.I. 1999/671), art. 1(3), Sch. 1 para. 3, Sch. 9 Pt. 1 (with Sch. 7); S.R. 1999/149, art. 2(c), Sch. 2

F7 Words in s. 638(6)(c) substituted (7.2.1994) by Pension Schemes (Northern Ireland) Act 1993 (c. 49), ss. 184, 186(2), Sch. 7 para. 22(2); S.R. 1994/17, art. 2

F8 S. 638(7)(8) substituted for s. 638(7) by Finance Act 1988 (c. 39), s. 55(2)(4)

F9 S. 638(7A) inserted (1.5.1995) by Finance Act 1995 (c. 4), Sch. 11 para. 9

F10 S. 638(7B) inserted (28.7.2000) by Finance Act 2000 (c. 17), Sch. 13 para. 13(4) (with Sch. 13 Pt. 2)

F11 S. 638(9)-(13) inserted (with effect in accordance with Sch. 13 para. 13(8) of the amending Act) by Finance Act 2000 (c. 17), Sch. 13 para. 13(5) (with Sch. 13 Pt. 2)

Modifications etc. (not altering text)

C1 For regulations see Part III Vol.5 (under

“Personal pension schemes”).

Marginal Citations

M1 Source-1987 (No.2) s.27

M2 Source-1987 (No.2) s.29

M3 Source-1987 (No.2) s.30

M4 1992 c. 12.