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HMRC internal manual

National Insurance Manual

HM Revenue & Customs
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Earnings of employees and office holders: retirement benefits schemes from 6th April 2006 - registered pension schemes: payments from such schemes

Paragraph 2(b) of Part 6 of Schedule 3 to the Social Security (Contributions)Regulations 2001 (as inserted by regulation 8(3) of the Social Security (Contributions)(Amendment No. 2) Regulations 2006)

Sections 204(1), 208 and 209 of, and Schedule 31 to, Finance Act 2004

A payment by way of any benefit from a registered pension scheme (“RPS”;NIM02715) to which:

  • section 204(1) (authorised pensions and lump sums) and Schedule 31 (taxation of benefits from a RPS); or
  • sections 208 (unauthorised payments income tax charge) or 209 (unauthorised payments income tax surcharge)

apply, is disregarded in the calculation of earnings for Class I NICs purposes. Insimple terms, this means that any payment out of a RPS is not liable for Class 1 NICs.

For details of:

  • the Class 1A NICs position on a payment by way of any benefit from a RPS, see NIM14510
  • the income tax position on:



  • authorised member payments from a RPS, see RPSM04101000 (contents) and RPSM09100180
  • unauthorised member payments, see RPSM04104020 (contents).

    RPSM04104530 gives an example of an unauthorised payments charge. In that example, for Class 1 NICs purposes:

the amount of Tom’ earnings is £10,000. The £10,000 unauthorised payment made toTom’s wife, Karen, is not earnings. It does not derive from Tom’s employment (see NIM02010)
as the £10,000 is liable for an unauthorised payments charge, the£10,000 payment is disregarded in calculating the amount of Tom’s earnings for Class 1NICs purposes.

  Words in bold are defined in the Glossary to the Registered Pension Schemes Manual (RPSM20000000). They have the same meaning for NICs purposes unless otherwise stated.