Hmm! There’s been a lot of talk lately about mega pensions. It’s confusing, I know, but the thing is employers can give their employees as big a pension as they like; there are no limits at all as long as the pension bears at least some relationship to earnings. There’s nothing new in this by the way; the farther reaches of the pension environment have always been a bit on the weird side. But, and it’s a big but, if both the employer and the employee want to take full advantage of all the tax efficiencies available to them then they have to work within the limitations available to ‘registered’ pension schemes, which before A-Day we used to call ‘approved’ schemes.
That’s the thing really; there are two types of pension scheme out there; we used to call them approved ones and unapproved ones in the old days. The approved ones are the ones we all know about and love. The unapproved schemes however have always been a bit more mysterious and could sometimes have been FURBS (Funded Unapproved Retirement Benefit Schemes) which, as the name suggests were funded arrangements, or something similar (but very different), an unfunded version called UURBS (Unfunded Unapproved Retirement Benefit Schemes). Just to confuse things a bit, the tax guys in these post A-Day days tend to refer to both FURBS and UURBS as Employer Financed Retirement Benefits Schemes (EFRBSs), although there are of course still distinctions between the way the pre-funded and non-pre-funded EFRBSs interact with the tax and NI system. Indeed, if you wade too deeply into this stuff you’ll soon find yourself in acronym heaven, or acronym hell I guess, depending on your particular slant on life.
These exotically named pension schemes that are virtually unknown to common mortals are a bit like Higgs Boson in physics, or the Upper Ordovician and Paleoarchaean eras in geology; they are the sort of things most of us would have to say “Pass!” to if we were on Mastermind and questions came up about them.
But the bottom line is that mega pensions can and do exist. And, as you’ll probably not be surprised to hear, there are some fairly fiddly rules and regulations attached to them. If any of you have the inclination and the time to spare and want to follow the path to full knowledge of mega pensions a good starting place would be these pages on the HMRC website: http://www.hmrc.gov.uk/manuals/eimanual/EIM15010.htm
There are plenty of other places that page will lead you too, it’s one hell of a journey, but don’t read too much at one sitting. Just read a little bit at a time and go out for a walk every now and then. It’s the sort of stuff that can really do your head in otherwise…
3 March 2009
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