NIM02755 | Earnings of employees and office holders: retirement benefits schemes from 6 April 2006 - employer-financed retirement benefits schemes: overview

Paragraphs 8 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)

From 6 April 2006, the Class 1 NICs position on a payment into, and out of, an employer-financed retirement benefits scheme (“EFRBS”) is substantially different to that which applies to a funded unapproved retirement benefits scheme (“FURBS”) before that date.

In broad terms, from that date:

• a payment into an EFRBS is disregarded in the calculation of an employee’s earnings for Class 1 NICs purposes

• a payment out of an EFRBS will also be disregarded in the calculation of earnings if:

For:

• had the scheme been a registered pension scheme (“RPS”; NIM02715), the payment would have been among the types of payment that a RPS is permitted to make; such payments are called “authorised member payments”; and

• satisfies certain other conditions

• is made after the employee’s employment has ended; and

• is not made in respect of a period during which the employee is re-employed by the secondary contributor from employment with whom the pension benefits are derived.

• the definition of an EFRBS, see NIM02756

• details of:

  • the types of authorised member payments that may be disregarded and the other conditions that need to be satisfied, see NIM02760 (contents)

  • an overview of the Class 1 NICs position on payments into, and out of, a FURBS before 6th April 2006, see NIM02156