Particular bodies: friendly societies: partnership societies
In the late 1980s it was realised that the creation of a friendly society offered small groups of individuals an attractive route to an Inland Revenue approved retirement annuity contract. As members of the society, and of its management committee, the individuals could retain control of the investment of their contributions.
During a brief period, prior to the advent of personal pension schemes, around 200 such societies were registered and obtained Inland Revenue approval for the retirement annuity contracts that they offered to their members. The personal pensions’ legislation introduced in 1987 gave the Inland Revenue greater control over the society’s investment policy, which greatly reduced the attractiveness of such societies. Since its introduction only a small number of societies have been set up and the simplification of pensions legislation from 6 April 2006 is expected to reinforce this trend.
The rules of such a society will limit membership to a select group. This is normally the partners of a particular partnership, or the directors of a partnership service company, but will occasionally be broader. It may consist, for example, of the directors or employees of a family company. For convenience, societies in which
- membership is restricted to a narrow group of individuals, and
- the objectives are limited to the provision of retirement annuity contracts or personal pensions, are known as ‘partnership societies’.
The activities of a partnership society constitute pension business and as such are outside the exemptions from tax that are specific to friendly societies. They are therefore dealt with in the specialist insurance offices in accordance with CTM40315. If a case of this type is found in any other office, its file should be sent to CTIS (Insurance) who will arrange for its transfer to the specialist insurance unit in LC Mid-size Business.