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HMRC internal manual

International Manual

DT Applications and claims - Types of income: Pensions and Annuities


While many employers operate a pension fund to meet their commitments to their employees some favour a less expensive alternative of purchasing annuities for retiring employees from life insurance companies. In these cases the employee is receiving a pension in all but name and the annuity is considered to be a pension paid in return “in consideration of past employment” - see INTM343130.

Where someone has been self-employed or has worked for an employer who does not operate a pension scheme they may have saved money with which to purchase an annuity. Such contributions are normally paid with benefit of income tax relief and must eventually be used to purchase an annuity.

Where an annuity is purchased from an insurance company it will fulfil all of the conditions for relief that are contained in the majority of Double Taxation Agreements(DTAs)

  • a stated sum.
  • payable periodically at stated times.
  • during life or for a specified or ascertainable period of time.

under an obligation to make the payments in return for adequate and full consideration in money or money’s worth.

If you have a claim for an annuity which is not paid by an insurance company you should refer the file to Technical Advice Group. But see also INTM343150 for Partnership Annuities.