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HMRC internal manual

National Insurance Manual

Class 1 NICs: earnings of employees and office holders: retirement benefits schemes from 6th April 2006: employer-financed pension only schemes: definition

Paragraph 9(2) 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)

An employer-financed pension only scheme (“EFPOS”) is a scheme which:

  • is financed by payments made by, or on behalf of, the secondary contributor; and
  • provides only a pension.

Because such a scheme provides only a pension, this means it is not anemployer-financed retirement benefits scheme (“EFRBS”) because it does notprovide “relevant benefits” (NIM02756). This isbecause the definition of “relevant benefits” specifically excludes a pensionwhich is taxable under Part 9 of ITEPA 2003 (see EIM15021 (point 2)).

For the purposes of the provision, “pension” does not include a pension that iscommuted to a lump sum. If the pension is so commuted, then the scheme is an EFRBS and notan EFPOS.

For details of the NICs position on:

  • employer’s payments into an EFPOS, see NIM02796
  • payments from: