APPENDIX 4INLAND REVENUE LIMITS
Overriding rule
1. This Appendix 4 overrides all provisions of the Trust Deed and Rules. It applies separately to each Section of the Scheme.
Section A (Applicable to Class A Members)
2.1 Any pension (before the exercise of any options available under the relevant Section) payable to a Member from any Section on retirement at any time between attaining age 50 and attaining age 75 (other than on retirement before Normal Pension Date on grounds of incapacity) shall not be such that the aggregate of such pension and of the pension equivalent of all other retirement benefits payable in respect of that Member’s Service including such benefit (if any) payable under Associated Schemes would exceed 1/60th of his Final Remuneration for each year of Service up to a maximum of forty, or such greater amount as will not prejudice the approval of the Scheme under Chapter I of Part XIV of the Taxes Act. For the purposes of this paragraph 2.1, the pension equivalent of all retirement benefits payable other than in the form of a non-commutable pension shall be 1/12th of its total cash value.
2.2 Any pension (before the exercise of any options available under the relevant Section) payable to a Member from any Section on retirement before Normal Pension Date on grounds of incapacity shall not exceed the amount which could have been provided in respect of him at Normal Pension Date under paragraph 2.1 above taking Final Remuneration as at the actual date of retirement but including in Service the period between the actual date of retirement and Normal Pension Date.
2.3 Notwithstanding paragraph 2.1 above, the pension which can be calculated under that paragraph in respect of a Member who ceases to be a Current Member before attaining age 75 may be increased by 5% compound for each complete year or in proportion to any increase in the Index which has occurred between the date of such cessation and the date on which the pension begins to be payable. Such amount may be further increased to comply with the preservation requirements of the Pension Schemes Act 1993 and, where appropriate, with the requirements of that Act relating to increases in Guaranteed Minimum Pensions.
3.1 Any lump sum retirement benefit payable to a Member from any Section (other than in commutation of pension on grounds of triviality) on retirement at any time between attaining age 50 and attaining age 75, except on retirement before Normal Pension Date on grounds of incapacity, shall not be such that the aggregate of such benefit and of all other lump sum retirement benefits payable in respect of that Member’s Service including such benefit (if any) payable from Associated Schemes would exceed 3/80ths of his Final Remuneration for each year of Service up to a maximum of forty, or such greater amount as will not prejudice approval of the Scheme under the Taxes Act.
3.2 Any lump sum retirement benefit payable to a Member from any Section on retirement before Normal Pension Date on grounds of incapacity shall not exceed the amount which could have been provided in respect of him at Normal Pension Date under paragraph 3.1 above taking Final Remuneration as at the actual date of retirement but including in Service the period between the actual date of retirement and Normal Pension Date.
3.3 Notwithstanding paragraph 3.1 above, the lump sum retirement benefit which can be calculated under that paragraph in respect of a Member who ceases to be a Current Member may be increased in proportion to any increase in the Index which has occurred between the date of such cessation and the date on which the benefit becomes payable.
4. In the case of a Member who is or who has at any time during his membership of the Section been a Controlling Director of any of the Employers the maximum aggregate benefit referred to in paragraphs 2.1 and 3.1 shall be reduced, where necessary for approval of the Scheme under Chapter I of Part XIV of the Taxes Act, so as to take account of any corresponding benefits under either a retirement annuity contract or trust scheme approved under Chapter III of Part XIV of that Act or a Personal Pension Scheme.
5. Any lump sum benefit (exclusive of any refund of the Member’s own contributions and any interest thereon) payable from any Section on the death of a Member while in Service or having left Service entitled to a deferred pension under Rule 32 before the commencement of his pension from the Section shall not be such that the aggregate thereof and of all like benefits under Associated Schemes would exceed the greater of:—
(a)£5,000; and
(b)four times the Member’s Final Remuneration at the date of his death
or such greater amount as will not prejudice the approval of the Scheme under the Taxes Act less, if the aggregate of such lump sums exceeds £2,500,
(i)any lump sum (other than a refund of his own contributions) payable on the death of the Member under all schemes relating to service with previous employers; and
(ii)any lump sum life assurance benefit payable on the death of the Member under a retirement annuity contract or trust scheme approved under Chapter III of Part XIV of the Taxes Act, or a Personal Pension Scheme.
6. Any pension payable to any person from any Section on the death of a Member (other than any pension provided by voluntary surrender of pension by the Member) shall not be such that the aggregate thereof and of any other such pension payable to that person from all Associated Schemes or other Sections of the Scheme would exceed 2/3rd of the aggregate pension (including the pension equivalent of any benefits not in pension form) payable to the Member from such schemes, or such greater amount as will not prejudice the approval of the Scheme under the Taxes Act.
For this purpose the pension payable to the Member shall be taken as
(a)that which he was receiving immediately before his death if applicable (including any increases to such pension while in payment up to and including the day before the Member’s death); or
(b)if he died after ceasing to be a Current Member but before Normal Pension Date and before any pension had become payable to him from the Scheme the pension to which such Member would have been entitled under Rule 32 taking into account the increases (if any) to such pension described in Rule 24.3 up to and including the day before the Member’s death together with any benefit from Associated Schemes or another Section of the Scheme which is a deferred benefit payable to the Member at any time between ages 50 and 75; or
(c)if he died whilst a Current Member before Normal Pension Date and before any pension had become payable to him from any Section, that which he would have received from the Section on retirement at Normal Pension Date had he remained a Current Member until that date without further change in remuneration together with any pension prospectively payable to the Member from Associated Schemes or another section of the Scheme had he remained in Service until Normal Pension Date without further change in remuneration; or
(d)if he died on or after Normal Pension Date and before any pension had become payable to him under the relevant Section that which he would have received on retirement at Normal Pension Date or, if later, that which he would have received if he had retired on the day before his death.
7. If a pension as described in paragraph 6 above is payable to more than one person from the relevant Section on the death of a Member, the total of all such pensions, when aggregated with all other such benefits under all Associated Schemes or other Sections of the Scheme, shall not exceed the aggregate pension of the Member calculated in accordance with paragraph 6 above or such greater amount as will not prejudice approval of the Scheme under the Taxes Act(1).
8. Any increase in a pension from the relevant Section after its commencement (other than an increase at a fixed rate not exceeding 3% per annum compound) shall not be so great as to cause such pension to exceed the maximum amount permitted under the foregoing paragraphs at the date of commencement, increased in proportion to any increase in the Index since that date. For this purpose there shall, in the case of a pension payable to the Member, be excluded from such maximum amount any pension which has been surrendered to provide a pension for a Spouse or Dependant.
9. In this Section A of Appendix 4:
Final Remuneration means in relation to a Member at the date of commencement of his pension from the relevant Section, or the date on which he ceases to be a Current Member, if earlier, the highest of:
(a)his highest total yearly remuneration from the Employers for any one of the last five years, except that in calculating the remuneration for any such year (the Relevant Year) the amount of any fluctuating emoluments shall be taken as the yearly average over a period of three or more years (or, with the consent of the Board of the Inland Revenue, such lesser period as the Member has been in receipt of such emoluments) ending on the last day of the Relevant Year provided that for such purpose the fluctuating emoluments for a year other than the Relevant Year may be increased in proportion to any increase in the Index from the last day of that year up to the last day of the Relevant Year; and
(b)the highest yearly average of his total emoluments from the Employers for any period of three or more consecutive years ending not more than ten years before the said date; and
(c)in the case only of a Member who dies in Service, the yearly average of any fluctuating emoluments over a period of three or more years (or such lesser period as he was in receipt of such emoluments) ending at the date of his death and subject, with the necessary alterations in point of detail, to the proviso to sub-paragraph (a) above together with the yearly rate of all other remuneration from the Employers applicable immediately before the date of his death; and
(d)in the case only of a deceased Member his highest total emoluments from the Employers for any year ending not more than three years before the date of his death;
provided that:
(i)a Member’s remuneration or other emoluments shall for this purpose include remuneration assessed or assessable under Schedule E from a sick pay or permanent health insurance scheme of the Employer (being a scheme under which benefit will not continue beyond Normal Pension Date), benefits in kind to the extent that they are assessed or assessable under Schedule E as emoluments and otherwise to the extent agreed by the Board of Inland Revenue for this purpose, and directors' fees other than any to which the Member is not beneficially entitled or any which are treated for tax purposes as a receipt of a profession; but
(ii)except in respect of a Member who dies in Service, a Member’s remuneration or other emoluments for this purpose shall not include anything in respect of which tax is chargeable by virtue of section 148 of the Taxes Act or any amounts which arise from the acquisition or disposal of shares or an interest in shares or from a right to acquire shares where the rights were acquired on or after 17th March 1987,
(iii)if the Member’s remuneration had been reduced for more than ten years on account of incapacity, his Final Remuneration may be calculated by reference to the date of such reduction; and
(iv)in calculating a Member’s remuneration for any year the amount thereof may be deemed to be increased in proportion to any increase in the Index over the period since the end of such year; and
(v)the alternative in (a) above shall not apply in respect of a Member (other than a deceased Member) who is a Controlling Director; and
(vi)any excess of the amount calculated in accordance with this definition over the Permitted Maximum shall be disregarded.
Section B (Applicable to Class B Members)
10.1 Any pension (before the exercise of any options available under the relevant Section) payable to a Member from the relevant Section at or before Normal Pension Date shall not be such that the aggregate of such pension and of the pension equivalent of all other retirement benefits payable under the Employers' Schemes to or in respect of that Member’s Service would exceed 1/60th of his Final Remuneration for each year of Service up to a maximum of forty, or such greater amount as will not prejudice the approval of the Scheme under Chapter I of Part XIV of the Taxes Act.
10.2 Notwithstanding paragraph 10.1 above, the pension which can be calculated under that paragraph in respect of a Member who ceases to be a Current Member before Normal Pension Date may be increased by 5% compound for each complete year, or in proportion to any increase in the Index which has occurred between the date of such cessation and the date on which the pension begins to be payable. Such amount may be further increased to comply with the preservation requirements of the Pension Schemes Act 1993 and, where appropriate, with the requirements of that Act relating to increases in Guaranteed Minimum Pensions.
11.1 Any lump sum retirement benefit payable to a Member from the relevant Section at or before Normal Pension Date (other than in commutation of pension on grounds of triviality or serious ill-health) shall not be such that the aggregate of such benefit and of all other lump sum retirement benefits payable to or in respect of him under the Employers' Schemes would exceed 3/80th of his Final Remuneration for each year of Service up to a maximum of forty disregarding any excess of that remuneration over £100,000 (or such other sum as may be specified in an order by the Treasury) for Members who become Current Members on or after 17th March 1987, or such greater amount as will not prejudice approval of the Scheme under the Taxes Act.
11.2 Notwithstanding paragraph 11.1 above, the lump sum retirement benefit which can be calculated under that paragraph in respect of a Member who ceases to be a Current Member may be increased in proportion to any increase in the Index which has occurred between the date of such cessation and the date on which the benefit in respect of the Member becomes payable.
12. In the case of a Member who is or who has at any time during his membership of the relevant Section been a Controlling Director of any of the Employers the maximum aggregate benefits referred to in paragraphs 10.1 and 11.1 shall be reduced, where necessary for approval of the Scheme under Chapter 1 of Part XIV of the Taxes Act, so as to take account of any corresponding benefits under either a retirement annuity contract or trust scheme approved under Chapter III of Part XIV of that Act or a Personal Pension Scheme.
13. If a pension and/or lump sum retirement benefit becomes payable after Normal Pension Date to a Member who has not previously received any benefit from the relevant Section, the limits described in the preceding paragraphs shall apply but with the modification that either:
(a)the maximum benefits payable are calculated as if they had been payable at Normal Pension Date and are then increased in proportion to any increase in the Index since his Normal Pension Date (or actuarially if this should give a higher amount) in the case of a pension, and by the addition of interest at a reasonable rate in the case of a lump sum, in respect of the period between Normal Pension Date and the actual date of payment; or
(b)the maximum benefits payable are calculated as if the actual date of payment had been his Normal Pension Date; for this purpose the limit of forty years referred to in paragraphs 10.1 and 11.1 above, where applicable, may be increased by the addition thereto of any period of Service (up to a maximum of five years) falling after Normal Pension Date;
provided always that in the case of a Controlling Director the said limitations shall be calculated as if his Normal Pension Date had been the earlier of this 70th birthday and the actual date of payment.
14. If a pension becomes payable after Normal Pension Date to a Member who has previously received a lump sum retirement benefit from the relevant Section, such pension shall not exceed an amount calculated in accordance with (a) of paragraph 13 above, except that in the case of a Controlling Director the alternative of increasing the pension actuarially shall not apply in respect of any period before his 70th birthday.
15. Any pension payable to any person from the relevant Section on the death of a Member (other than any pension provided by voluntary surrender of pension by the Member) shall not be such that the aggregate thereof and of any other such pension payable to that person from the Employer’s Schemes would exceed 2/3rd of the aggregate pension (including the pension equivalent of any benefits not in pension form) payable to the Member from such schemes, or such greater amount as will not prejudice the approval of the Scheme under the Taxes Act.
For this purpose the pension payable to the Member shall be taken as:
(a)that which he was receiving immediately before his death if applicable (including any increases to such pension while in payment up to and including the day before the Member’s death); or
(b)if he died after ceasing to be a Current Member but before Normal Pension Date and before any pension had become payable to him from the Scheme the pension to which such Member would have been entitled under Rule 32 taking into account the increases (if any) to such pension described in Rule 24.3 up to and including the day before the Member’s death together with any benefit from the Employers' Schemes which is a deferred benefit payable to the Member at Normal Pension Date; or
(c)if he died whilst a Current Member before Normal Pension Date and before any pension had become payable to him from the relevant Section, that which he would have received on retirement at Normal Pension Date had he remained a Current Member until that date without further change in remuneration together with any pension prospectively payable to the Member from the Employers' Schemes had he remained in Service until Normal Pension Date without further change in remuneration; or
(d)if he died on or after Normal Pension Date and before any pension had become payable to him under the relevant Section that which he which he would have received on retirement at Normal Pension Date or, if later, that which he would have received if he had retired on the day before his death.
16. If a pension as described in paragraph 15 above is payable to more than one person from the relevant Section on the death of a Member, the total of all such pensions, when aggregated with all other such benefits under the Employers' Schemes, shall not exceed the aggregate pension of the Member calculated in accordance with paragraph 15 above or such greater amount as will not prejudice approval of the Scheme under the Taxes Act.
17. Any increase in a pension from the relevant Section after its commencement (other than an increase at a fixed rate not exceeding 3% per annum compound) shall not be so great as to cause such pension to exceed the maximum amount permitted under the foregoing paragraphs at the date of its commencement, increased in proportion to any increase in the Index since that date. For this purpose there shall, in the case of a pension payable to the Member, be excluded from such maximum amount any pension which has been surrendered to provide a pension for a Spouse or Dependant or to provide a lump sum benefit.
18. Any lump sum benefit (exclusive of any refund of the Member’s own contributions and any interest thereon) payable from the relevant Section on the death of a Member while in Service or having left Service entitled to a deferred pension shall under Rule 32 before the commencement of his pension from the relevant Section not be such that the aggregate thereof and of all like benefits under the Employers' Schemes would exceed the greater of:
(a)£5,000; and
(b)four times the Member’s Final Remuneration at the date of his death,
or such greater amount as will not prejudice the approval of the Scheme under the Taxes Act less, if the aggregate of such lump sums exceeds £2,500,
(i)any lump sum (other than a refund of his own contributions and any interest theron) payable on the death of the Member under all schemes of previous employers; and
(ii)any lump sum life assurance benefit payable on the death of the Member under a retirement annuity contract or trust scheme approved under Chapter III of Part XIV of the Taxes Act(2) or a Personal Pension Scheme.
19. In this Section B of this Appendix 4:
Final Remuneration means in relation to a Member at the date of commencement of his pension from the relevant Section, or the date on which he ceases to be a Current Member if earlier, the highest of
(a)his highest total yearly remuneration from the Employers for any one of the last five years, except that in calculating the remuneration for any such year (the Relevant Year) the amount of any fluctuating emoluments shall be taken as the yearly average over a period of three or more years (or, with the consent of the Board of Inland Revenue, such lesser period as the Member has been in receipt of such emoluments) ending on the last day of the Relevant Year provided that for such purpose the fluctuating emoluments for a year other than the Relevant Year may be increased in proportion to any increase in the Index from the last day of that year up to the last day of the Relevant Year; and
(b)the highest yearly average of his total emoluments from the Employers for any period of three or more consecutive years ending not more than ten years before the said date; and
(c)in the case only of a Member who dies in Service, the yearly average of any fluctuating emoluments over a period of three or more years (or such lesser period as he was in receipt of such emoluments) ending at the date of his death and subject, with the necessary alterations in point of detail, to the proviso to sub-paragraph (a) above together with the yearly rate of all other remuneration from the Employers applicable immediately before the date of his death; and
(d)in the case only of a deceased Member, his highest total emoluments from the Employers for any year ending not more than three years before the date of his death;
or such greater amount as will not prejudice the approval of the Scheme under the Taxes Act, provided that:
(i)a Member’s remuneration or other emoluments shall for this purpose include remuneration assessed or assessable under Schedule E from a sick pay or permanent health insurance scheme of the Employer (being a scheme under which benefit will not continue beyond Normal Pension Date), benefits in kind to the extent that they are assessed or assessable under Schedule E as emoluments and otherwise to the extent agreed by the Board of Inland Revenue for this purpose, and directors' fees other than any to which the Member is not beneficially entitled or any which are treated for tax purposes as a receipt of a profession; but
(ii)except in respect of a Member who dies in Service, a Member’s remuneration or other emoluments for this purpose shall not include anything in respect of which tax is chargeable by virtue of section 148 of the Taxes Act or any amounts which arise from the acquisition or disposal of shares or an interest in shares or from a right to acquire shares, where the rights were acquired on or after 17th March 1987;
(iii)if the Member’s remuneration has been reduced for more than ten years on account of incapacity, his Final Remuneration may be calculated by reference to the date of such reduction; and
(iv)in calculating a Member’s remuneration for any year the amount thereof may be deemed to be increased in proportion to any increase in the Index over the period since the end of such year (except that for the purpose of paragraph 11 of this Section of this Appendix 4, it shall, in respect of Members who became Current Members before 17th March 1987 and of Continued Rights Members who are regarded by the Board of Inland Revenue as having pre 17th March 1987 continued rights, only be increased to the same extent that the Member’s total benefit exceed the maximum permitted under paragraph 10 of this Section of this Appendix 4 calculated without reference to such increase); and
(v)the alternative in (a) above shall not apply in respect of a Member (other than a deceased Member) who is a Controlling Director or to any other Member whose remuneration in any year beginning on or after 6th April 1987 used for the calculation of benefits has exceeded £100,000 or such other sum as may be prescribed in an order made by the Treasury; and
(vi)in respect of persons who became Current Members on or after 1st June 1989 (other than Continued Rights Members) any excess of the amount calculated in accordance with this definition over the Permitted Maximum shall be disregarded.