Finance Act 1989

Section 77.

SCHEDULE 7U.K. Personal Pension Schemes

Part IU.K. Amendments of Taxes Act

1U.K.Chapter IV of Part XIV of the Taxes Act 1988 (personal pension schemes)shall be amended as mentioned in the following provisions of this Part of thisSchedule.

2(1)Section 635 (lump sum to member) shall be amended as follows.U.K.

(2)The following subsection shall be substituted for subsection (3) (lump sumnot to exceed one quarter of value of benefits for member)—

“(3)The lump sum must not exceed one quarter of the difference between—

(a)the total value, at the time when the lump sum is paid, of the benefitsprovided for by the arrangements made by the member in accordance with thescheme, and

(b)the value, at that time, of such of the member’s rights under the schemeas are protected rights for the purposes of the SocialSecurity Act 1986 or the Social Security(Northern Ireland) Order 1986.”

(3)Subsection (4) (lump sum not to exceed £150,000 or sum specified byTreasury by order) shall cease to have effect.

(4)This paragraph shall have effect in relation to the approval of a schemeon or after the day on which this Act is passed; but if the scheme came intoexistence before that day sub-paragraph (2) above shall not have effect asregards arrangements made by a member in accordance with the scheme beforethat day.

3(1)In section 640 (maximum amount of deductions) the following table shallbe substituted for the table in subsection (2) (maximum amount by referenceto age)—U.K.

(2)This paragraph shall have effect for the year 1989-90 and subsequent yearsof assessment.

4(1)The following section shall be inserted after section 640—U.K.

“640A Earnings cap.

(1)In arriving at an individual’s net relevant earnings for a year ofassessment for the purposes of section 640 above, any excess of what would behis net relevant earnings for the year (apart from this subsection) over theallowable maximum for the year shall be disregarded.

(2)In subsection (1) above “the allowable maximum” means, as regards a particular yearof assessment, the figure found for that year by virtue of subsections (3) and(4) below.

(3)For the year of assessment 1989-90 the figure is £60,000.

(4)For the year of assessment 1990-91 and any subsequent year of assessmentthe figure is the figure found for that year, for the purposes of section590C, by virtue of section 590C(4) and (5).”

(2)This paragraph shall have effect for the year 1989-90 and subsequent yearsof assessment.

5(1)Section 644 (meaning of relevant earnings) shall be amended as follows.U.K.

(2)In subsection (2) for “(5)” there shall be substituted “(6F)”.

(3)The following subsections shall be inserted after subsection (6)—

“(6A)Emoluments of an individual as an employee of a company are not incomewithin subsection (2) above if—

(a)he is a controlling director of the company at any time in the year ofassessment in question or has been a controlling director of the company atany time in the ten years immediately preceding that year of assessment, and

(b)any of subsections (6B) to (6E) below applies in his case.

(6B)This subsection applies in the case of the individual if—

(a)at any time in the year of assessment in question he is in receipt ofbenefits under a relevant superannuation scheme, and

(b)the benefits are payable in respect of past service with the company.

(6C)This subsection applies in the case of the individual if—

(a)at any time in the year of assessment in question he is in receipt ofbenefits under a personal pension scheme,

(b)the scheme has received a transfer payment relating to him from a relevantsuperannuation scheme, and

(c)the transfer payment is in respect of past service with the company.

(6D)This subsection applies in the case of the individual if—

(a)at any time in the year of assessment in question he is in receipt ofbenefits under a relevant superannuation scheme,

(b)the benefits are payable in respect of past service with another company,

(c)the emoluments are for a period during which the company mentioned insubsection (6A) above has carried on a trade or business previously carriedon by the other company, and

(d)the other company carried on the trade or business at any time during theperiod of service in respect of which the benefits are payable.

(6E)This subsection applies in the case of the individual if—

(a)at any time in the year of assessment in question he is in receipt ofbenefits under a personal pension scheme,

(b)the scheme has received a transfer payment relating to him from a relevantsuperannuation scheme,

(c)the transfer payment is in respect of past service with another company,

(d)the emoluments are for a period during which the company mentioned insubsection (6A) above has carried on a trade or business previously carriedon by the other company, and

(e)the other company carried on the trade or business at any time during theperiod of service in respect of which the transfer payment was made.

(6F)For the purposes of subsections (6A) to (6E) above—

(a)a person is a controlling director of a company if he is a director (asdefined by section 612(1)), and he is within paragraph (b) of section 417(5),in relation to the company;

(b)“relevant superannuation scheme” has the same meaning as insection 645(1);

(c)references to benefits payable in respect of past service with a companyinclude references to benefits payable partly in respect of past service withthe company; and

(d)references to a transfer payment in respect of past service with a companyinclude references to a transfer payment partly in respect of past servicewith the company.”

(4)This paragraph shall be deemed to have come into force on 6th April 1989.

6(1)Section 645 (earnings from pensionable employment) shall be amended asfollows.U.K.

(2)In subsection (1)(c) for the words “neither subsection (4) norsubsection (5) below applies” there shall be substituted the words “subsection (4) below does not apply”.

(3)In subsection (3) the word “and” following paragraph (a) shall beomitted and after paragraph (b) there shall be inserted “and

(c)which is of a description mentioned in section 596(1)(a), (b) or (c).”

(4)After subsection (4) there shall be inserted—

“(4A)Where the emoluments from an office or employment held by an individualare foreign emoluments within the meaning of section 192, this section shallhave effect with the substitution of the following for paragraph (c) ofsubsection (3) above—”

(c)which corresponds to a scheme of a description mentioned in section596(1)(a), (b) or (c).””

(5)Subsection (5) shall cease to have effect.

(6)This paragraph shall be deemed to have come into force on 6th April 1989.

7(1)In section 646 (“net relevant earnings”) in subsection (1) after thewords “(7) below” there shall be inserted the words “and section646A”.U.K.

(2)This paragraph shall have effect for the year 1989-90 and subsequent yearsof assessment.

8(1)The following section shall be inserted after section 646—U.K.

“646A Earnings from associated employments.

(1)This section applies where in the year of assessment in question—

(a)an individual holds two or more offices or employments which areassociated in that year,

(b)one or more of them is an office or employment to which section 645applies (“pensionable job”), and

(c)one or more of them is an office or employment to which that section doesnot apply (“non-pensionable job”).

(2)Where the emoluments for that year from the pensionable job (or jobs) areequal to or exceed the allowable maximum for that year, section 646(1) shallhave effect in the case of the individual as if the references to relevantearnings were references to relevant earnings not attributable to thenon-pensionable job (or jobs).

(3)Where the allowable maximum for that year exceeds the emoluments for thatyear from the pensionable job (or jobs), the individual’s net relevantearnings, so far as attributable to the non-pensionable job (or jobs), shallnot be greater than the amount of the excess.

(4)For the purposes of this section two or more offices or employments heldby an individual in a year of assessment are associated in that year if theemployers in question are associated at any time during it.

(5)For the purposes of subsection (4) above, employers are associated if(directly or indirectly) one is controlled by the other or if both arecontrolled by a third person.

(6)In subsection (5) above the reference to control, in relation to a bodycorporate, shall be construed—

(a)where the body corporate is a close company, in accordance with section416, and

(b)where it is not, in accordance with section 840.

(7)In this section “the allowable maximum” has the same meaning as in section640A(1).”

(2)This paragraph shall have effect for the year 1989-90 and subsequent yearsof assessment.

9U.K.In section 655(5) (provisional approval in the case of applications madebefore 1st February 1990) the words “in cases where the applications aremade before 1st February 1990” shall be omitted.

Part IIU.K. Schemes Approved Before Passing of This Act

InterpretationU.K.

10U.K.In this Part of this Schedule—

(a)“personal pension scheme” has the same meaning as in ChapterIV of Part XIV of the Taxes Act 1988, and

(b)references to approval of such a scheme do not include references toprovisional approval under regulations made under section 655(5) of that Act.

Lump sum to memberU.K.

11(1)This paragraph applies as regards arrangements made by a member of apersonal pension scheme approved by the Board before the day on which this Actis passed, if the arrangements are made by the member in accordance with thescheme on or after that day.U.K.

(2)The rules of the scheme shall have effect (notwithstanding anything inthem to the contrary) as if any limitation imposed on the maximum amountpayable to the member by way of lump sum, and imposed by reference to afraction of the total value of the benefits for him provided for by thearrangements, were imposed by reference to the same fraction of the differencebetween—

(a)the total value, at the time when the lump sum is paid, of the benefitsprovided for by the arrangements, and

(b)the value, at that time, of such of his rights under the scheme as areprotected rights for the purposes of the [F1Pension Schemes Act 1993] or the [F2Pension Schemes (Northern Ireland) Act 1993].

12(1)This paragraph applies where on or after the day on which this Act ispassed a lump sum becomes payable under a personal pension scheme approved bythe Board before that day.U.K.

(2)The rules of the scheme shall have effect (notwithstanding anything inthem to the contrary) as if any limitation imposed on the maximum amountpayable to a member by way of lump sum, and imposed by reference to a figure,did not apply.

(3)The reference in sub-paragraph (2) above to a limitation imposed on themaximum amount payable to a member by way of lump sum does not include areference to a limitation imposed on the maximum amount so payable out of atransfer payment.