Free-standing additional voluntary contribution meaning

Government policy For many years, as a feature of government policy in the UK, the establishment of private pensions to sit alongside state provision has been actively promoted. This initially took the form of occupational pension schemes set up by employers for their workforces and, in later years, broadened to include personal pensions arranged by individuals themselves. The principal means of encouragement has been the granting of tax reliefs, both to those creating pension schemes and to their members, in respect of contributions, pension fund income, and pension benefits. It should also be recognised that, until very recently, neither the offering of private pensions in the UK nor membership of a pension scheme was compulsory; even now, exceptions apply (see ‘Stakeholder pension schemes’ and ‘Automating enrolment and the National Employment Savings Trust (NEST)’ below). General administration of private pension schemes rests with the Department for Work and Pensions (DWP), while the Pensions Regulator ensures schemes are conducted properly as required by law. HMRC is responsible for...

Pension Schemes Act 2015 The Pension Schemes Act 2015 (PSA 2015) covers three principal areas: the new ‘defined ambition’ pensions the provision of the ‘guidance guarantee’ amendments to the cash equivalent transfer provisions of the Pension Schemes Act 1993 (PSA 1993) Defined ambition arrangements can be created to set targets for benefits, yet an individual’s right extends only to the funds in their pot. This model permits the sharing of risk and return between members of the scheme, whilst keeping such arrangements outside most of the defined benefit requirements found elsewhere in pensions legislation. The guidance guarantee is free-of-charge pensions ‘guidance’ offered at retirement to all members of a defined contribution pension scheme, effectively to explain the choices available for decumulation, particularly following the changes announced in the 2014 Budget and taking effect from 6 April 2015 under the Taxation of Pensions Act 2014 (TPA 2014). The Financial Conduct Authority regulates the provision of this guidance, and there is an...

ARCHIVED: This archived Practice Note outlines the pensions tax framework and the former Inland Revenue ceilings that applied prior to 6 April 2006 (A-day), and which may, in part, still remain pertinent. It is not kept up to date. The pensions tax system established by the Finance Act 2004 took effect on 6 April 2006, also called A-day. The pre A-day rules can still matter for schemes, many of which have preserved some or all of the restrictions that existed under the earlier system. This Practice Note concentrates on the tax regime that operated before A-day...