Finance (No.2) Act 1987

Other tax consequences of approval

38 Employer’s contributions.

Where contributions are paid by an employer under approved personal pension arrangements made by his employee, those contributions shall not be regarded as emoluments of the employment chargeable to tax under Schedule E.

39 Exemption for scheme investments.

(1) Income derived by a person from investments or deposits held by him for the purposes of an approved personal pension scheme shall be exempt from income tax.

(2) A gain accruing to a person on his disposal of investments held by him for the purposes of an approved personal pension scheme shall not be a chargeable gain for the purposes of capital gains tax.

(3) In section 323(4) of the Taxes Act (which lists the premiums referable to an insurance company’s pension business) after paragraph (aa) there shall be inserted—

“(ab) any contract made under approved personal pension arrangements within the meaning of Chapter II of Part I of the Finance (No. 2) Act 1987”;

and nothing in the preceding provisions of this section shall be construed as affording relief in respect of any sums to be brought into account under section 314 of the Taxes Act.

(4) In section 6 of the [1975 c. 7.] Finance Act 1975 (investment by pension funds in building societies) at the end of subsection (3) there shall be added “and section 39 of the Finance (No. 2) Act 1987”.

40 Unit trusts.

(1) Subsection (2) of section 354 and subsection (3) of section 354A of the Taxes Act (which treat unit holders under unit trust schemes as receiving certain payments) shall not apply to any authorised unit trust which is also an approved personal pension scheme.

(2) A gain accruing to a unit holder on his disposal of units in an authorised unit trust which is also an approved personal pension scheme shall not be a chargeable gain for the purposes of capital gains tax.

41 Treatment of annuities.

(1) An annuity payable under approved personal pension arrangements shall be treated as earned income of the annuitant.

(2) Subsection (1) above applies only in relation to the annuitant to whom the annuity is made payable by the terms of the arrangements.

(3) In section 230 of the Taxes Act (which gives special treatment to purchased life annuities) at the end of subsection (7) (exclusions) there shall be added— “, or

(e) to any annuity payable under approved personal pension arrangements within the meaning of Chapter II of Part I of the Finance (No. 2) Act 1987.”.