Finance Act 1989 (c. 26)

SCHEDULES

SCHEDULE 6 Retirement Benefits Schemes

Part II Approved Schemes: General

Preliminary

19 (1) This Part of this Schedule shall be deemed to have come into force on 14th March 1989 and, subject to sub-paragraphs (2) to (4) below, applies in relation to any retirement benefits scheme (within the meaning of Chapter I of Part XIV of the Taxes Act 1988) approved by the Board before the day on which this Act is passed.

(2) The Board may by regulations provide that, in circumstances prescribed in the regulations, this Part of this Schedule or any provision of it shall not apply or shall apply with such modifications as may be so prescribed.

(3) Regulations under sub-paragraph (2) above—

(a) may include provision authorising the Board to direct that this Part of this Schedule or any provision of it shall not apply in any particular case where in the opinion of the Board the facts are such that its application would not be appropriate;

(b) may take effect (and may authorise any direction given under them to take effect) as from 14th March 1989 or any later date;

(c) may make such supplementary provision as appears to the Board to be necessary or expedient.

(4) This Part of this Schedule shall not apply to a scheme if, before the end of 1989, the administrator of the scheme gives written notice to the Board that it is not to apply.

(5) Where a notice is given to the Board under sub-paragraph (4) above, the scheme shall cease to be approved—

(a) if it came into existence before 14th March 1989, with effect from 1st June 1989 or (if later) the date with effect from which it was approved;

(b) if it came into existence on or after 14th March 1989, with effect from the date with effect from which it was approved.

Remuneration

20 (1) This paragraph applies—

(a) where the scheme came into existence before 14th March 1989, as regards an employee who became a member of the scheme on or after 1st June 1989;

(b) where the scheme came into existence on or after 14th March 1989, as regards any employee who is a member of the scheme (whenever he became a member).

(2) The rules of the scheme shall have effect (notwithstanding anything in them to the contrary and notwithstanding the effect of anything in Schedule 23 to the Taxes Act 1988) as if, in arriving at the employee’s relevant annual remuneration for the purposes of calculating benefits, any excess of what would be his relevant annual remuneration (apart from this paragraph) over the permitted maximum for the year of assessment in which his participation in the scheme ceases shall be disregarded.

(3) The rules of the scheme shall have effect (notwithstanding anything in them to the contrary) as if, in arriving at the employee’s remuneration for the year 1988-89 or any subsequent year of assessment for the purposes of any restriction on the aggregate amount of contributions payable under the scheme by the employee and the employer, there were disregarded any excess of what would be his remuneration for the year (apart from this paragraph) over the permitted maximum for the year.

(4) In this paragraph “the permitted maximum”, in relation to a year of assessment, means the figure found for that year by virtue of sub-paragraphs (5) and (6) below.

(5) For the years 1988-89 and 1989-90 the figure is £60,000.

(6) For any subsequent year of assessment the figure is the figure found for that year, for the purposes of section 590C of the Taxes Act 1988, by virtue of section 590C(4) and (5).

21 (1) The rules of the scheme shall have effect (notwithstanding anything in them to the contrary) as if the amount of contributions payable under the scheme by an employee in the year 1989-90 or any subsequent year of assessment were limited to 15 per cent. of his remuneration for the year in respect of the employment.

(2) Where in relation to any year of assessment a percentage higher than 15 per cent. applies for the purposes of section 592(8) or (8A) of the Taxes Act 1988 (relief in respect of contributions) as regards any employee, sub-paragraph (1) above, as regards him, shall have effect in relation to that year with the substitution for 15 per cent. of that higher percentage.

22 (1) This paragraph applies—

(a) where the scheme came into existence before 14th March 1989, as regards an employee who became a member of the scheme on or after 1st June 1989;

(b) where the scheme came into existence on or after 14th March 1989, as regards any employee who is a member of the scheme (whenever he became a member).

(2) For the purposes of paragraph 21(1) above, in arriving at the employee’s remuneration for the year any excess of what would be his remuneration for the year (apart from this sub-paragraph) over the permitted maximum for the year shall be disregarded.

(3) In sub-paragraph (2) above “the permitted maximum”, in relation to a year of assessment, means the figure found for that year by virtue of sub-paragraphs (4) and (5) below.

(4) For the year 1989-90 the figure is £60,000.

(5) For any subsequent year of assessment the figure is the figure found for that year, for the purposes of section 590C of the Taxes Act 1988, by virtue of section 590C(4) and (5).

Accelerated accrual

23 (1) This paragraph applies where the scheme allows a member to commute his pension or part of it for a lump sum or sums and—

(a) where the scheme came into existence before 14th March 1989, applies as regards an employee who became a member of the scheme on or after 1st June 1989, and

(b) where the scheme came into existence on or after 14th March 1989, applies as regards any employee who is a member of the scheme (whenever he became a member).

(2) The rules of the scheme shall have effect (notwithstanding anything in them to the contrary and notwithstanding the effect of paragraph 3 of Schedule 23 to the Taxes Act 1988) as if they did not allow the employee to obtain by way of commutation a lump sum or sums exceeding in all the greater of the following sums—

(a) a sum of three-eightieths of his relevant annual remuneration for each year of service up to a maximum of 40;

(b) a sum of the pension payable under the scheme to the employee for the first year in which it is payable multiplied by 2.25.

(3) The following rules shall apply in calculating, for the purposes of sub-paragraph (2) above, the pension payable under the scheme to the employee for the first year in which it is payable—

(a) if the pension payable for the year changes, the initial pension payable shall be taken;

(b) it shall be assumed that the employee will survive for the year;

(c) the effect of commutation, and of any allocation of pension to provide benefits for survivors, shall be ignored.

24 (1) This paragraph applies where the scheme provides a lump sum or sums for a member otherwise than by commutation of his pension or part of it and—

(a) where the scheme came into existence before 14th March 1989, applies as regards an employee who became a member of the scheme on or after 1st June 1989, and

(b) where the scheme came into existence on or after 14th March 1989, applies as regards any employee who is a member of the scheme (whenever he became a member).

(2) The rules of the scheme shall have effect (notwithstanding anything in them to the contrary and notwithstanding the effect of paragraph 4 of Schedule 23 to the Taxes Act 1988) as if they did not allow the payment to the employee, otherwise than by way of commutation, of a lump sum or sums exceeding in all the greater of the following sums—

(a) a sum of three-eightieths of his relevant annual remuneration for each year of service up to a maximum of 40;

(b) a sum of the relevant number of eightieths of his relevant annual remuneration.

(3) For the purposes of sub-paragraph (2) above the relevant number shall be found by taking the number of eightieths (of relevant annual remuneration) by reference to which the pension payable under the scheme to the employee is calculated, multiplying that number by three, and treating the resulting number as 120 if it would otherwise exceed 120.

Associated employments

25 (1) This paragraph applies—

(a) where the scheme came into existence before 14th March 1989, as regards an employee who became a member of the scheme on or after 1st June 1989;

(b) where the scheme came into existence on or after 14th March 1989, as regards any employee who is a member of the scheme (whenever he became a member).

(2) Where the employee is a member of the scheme by virtue of two or more relevant associated employments, the rules of the scheme shall have effect as mentioned in sub-paragraph (3) below.

(3) The rules of the scheme shall have effect (notwithstanding anything in them to the contrary) as if they prohibited the amount payable by way of pension in respect of service in any of the relevant associated employments, when aggregated with any amount payable by way of pension in respect of service in the other such employment or employments, from exceeding the relevant amount.

(4) For the purposes of sub-paragraph (3) above the relevant amount, in relation to the employee, shall be found by applying the following formula—

(5) For the purposes of this paragraph—

(a) section 590B(5) and (6) of the Taxes Act 1988 shall apply for the purpose of defining A, and

(b) section 590B(9) to (11) of that Act shall apply for the purpose of defining C,

as they apply for the purposes of section 590B of that Act, except that for the purposes of this paragraph A shall not exceed 20.

(6) The reference to two or more relevant associated employments shall be construed in accordance with section 590A of the Taxes Act 1988.

Connected schemes

26 (1) This paragraph applies—

(a) where the scheme came into existence before 14th March 1989, as regards an employee who became a member of the scheme on or after 1st June 1989;

(b) where the scheme came into existence on or after 14th March 1989, as regards any employee who is a member of the scheme (whenever he became a member).

(2) Where in relation to the employee the scheme is connected with another scheme which is (or other schemes each of which is) an approved scheme, the rules of the scheme shall have effect as mentioned in sub-paragraph (3) below.

(3) The rules of the scheme shall have effect (notwithstanding anything in them to the contrary) as if they prohibited the amount payable by way of pension under the scheme, when aggregated with any amount payable by way of pension under the other scheme or schemes, from exceeding the relevant amount.

(4) For the purposes of sub-paragraph (3) above the relevant amount, in relation to the employee, shall be found by applying the following formula—

(5) For the purposes of this paragraph—

(a) section 590B(7) and (8) of the Taxes Act 1988 shall apply for the purpose of defining B, and

(b) section 590B(9) to (11) of that Act shall apply for the purpose of defining C,

as they apply for the purposes of section 590B of that Act, except that for the purposes of this paragraph B shall not exceed 20.

(6) References in this paragraph to the scheme being connected with another scheme in relation to the employee shall be construed in accordance with section 590A of the Taxes Act 1988.

Augmentation

27 (1) This paragraph applies—

(a) where the scheme came into existence before 14th March 1989, as regards an employee who became a member of the scheme on or after 1st June 1989;

(b) where the scheme came into existence on or after 14th March 1989, as regards any employee who is a member of the scheme (whenever he became a member).

(2) Where in addition to being a member of the scheme (the main scheme) the employee is also a member of an approved scheme (the voluntary scheme) which provides additional benefits to supplement those provided by the main scheme and to which no contributions are made by any employer of his, sub-paragraph (3) below shall apply in relation to any augmentation of the benefits provided for him by the main scheme after he has ceased to participate in it.

(3) Any rules of the main scheme imposing a limit on the amount of a benefit provided for the employee shall have effect (notwithstanding anything in them to the contrary) as if they provided for the limit to be reduced by the amount of any like benefit provided for the employee by the voluntary scheme.

Centralised schemes

28 (1) Where the scheme is a centralised scheme, sub-paragraph (1)(a) and (b) of each of paragraphs 20 and 22 to 27 above shall have effect with the substitution for the reference to the coming into existence of the scheme of a reference to the commencement of the employer’s participation in the scheme.

(2) For the purposes of this paragraph a centralised scheme is a retirement benefits scheme (within the meaning of Chapter I of Part XIV of the Taxes Act 1988) established for the purpose of enabling any employer, other than an employer associated with the person by whom the scheme is established, to participate in it as regards his employees.

(3) For the purposes of sub-paragraph (2) above one person is associated with another if (directly or indirectly) one is controlled by the other or if both are controlled by a third person.

(4) In sub-paragraph (3) above the reference to control, in relation to a body corporate, shall be construed—

(a) where the body corporate is a close company, in accordance with section 416 of the Taxes Act 1988, and

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

Election

29 (1) In a case where—

(a) an employee became a member of the scheme on or after 17th March 1987 and before 1st June 1989, and

(b) he gives written notice to the administrator of the scheme that this Part of this Schedule is to apply in his case,

he shall be deemed for the purposes of this Part of this Schedule to have become a member of the scheme on 1st June 1989.

(2) A notice under this paragraph shall be given in such form as the Board may prescribe.

Supplementary

30 In this Part of this Schedule “relevant annual remuneration” means final remuneration or, if the scheme provides for benefits to be calculated by reference to some other annual remuneration, that other annual remuneration.