Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

National Insurance Manual

From
HM Revenue & Customs
Updated
, see all updates

Class 1 NICs: earnings of employees and office holders: retirement benefits schemes from 6th April 2006: employer-financed retirement benefits schemes: payments from such schemes: authorised member payments: pensions: pension rules 4 and 6

Paragraphs 8(b) and 10 of Part 6 of Schedule 3 to the Social Security (Contributions)Regulations 2001 (as inserted by regulation 8(7) of the Social Security (Contributions)(Amendment No. 2) Regulations 2006)

Sections 152(6)-(7), 165(1), 279(1) of, and paragraph 1 of Schedule 28 to, Finance Act2004 (as amended by Finance Act 2005)

Pension rules 4 and 6 referred to in NIM02766 are asfollows:

Pension rule 4

If the individual is below age 75, the only types of pension that may be paid in respectof a money purchase arrangement are:

  • a scheme pension, so long as the individual has had the opportunity to select a lifetime annuity instead
  • a lifetime annuity; or
  • an unsecured pension.

Here:

  • “scheme pension” has the same meaning as in pension rule 3 (paragraph 2(2)(a) of Schedule 28; NIM02767 and RPSM09101210)
  • “lifetime annuity” (RPSM09101710) means an annuity payable to the employee:

 

  •  

    • by an insurance company of the employee’s choosing
    • for life or the later of:

a. the employee’s death; and
b. the period ending 10 years after the date from which the employee became entitled to the scheme pension (paragraph 3(1) of Schedule 28; RPSM09101780)

  • “unsecured pension” (paragraph 4 of Schedule 28; RPSM09102010) means:

 

  • a short-term annuity (paragraphs 4(a) and 6 of Schedule 28; RPSM092040 and RPSM09102200 (contents)) or
  • income withdrawal (paragraph 4(b) and 7 of Schedule 28; RPSM09102030)

 

  • “short-term annuity” means an annuity:

 

  • bought from an insurance company of the employee’s choosing
  • bought only from funds held in the employee’s unsecured pension fund
  • which is payable for a period not exceeding five years and ending before the employee reaches age 75
  • whose amount cannot go down or is determined by HMRC regulations (RPSM09102230)
     
  • “income withdrawal” means, if the employee:

 

  • is below age 75, an amount, other than an annuity, which they are entitled to be paid from their unsecured pension fund
  • is age 75 or over, an amount which they are entitled to be paid from their alternatively secured pension fund
  • Pension rule 6

If the individual is age 75 or over, the only types of pension that may be paid in respectof a money purchase arrangement are:

 

  • a scheme pension, so long as the individual has had the opportunity to select a lifetime annuity instead
  • a lifetime annuity; or
  • an alternatively secured pension.

Here:

 

  • “scheme pension” has the same meaning as in pension rule 3 (see NIM02767)
  • “lifetime annuity” has the same meaning as in pension rule 4 above
  • an “alternatively secured pension” means income withdrawal (paragraph 5 of Part 1 of Schedule 28)
  • “income withdrawal” has the same meaning as in pension rule 4 above.

 

For details of pension rules 1 and 3, see NIM02767.

  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.