NIM02767 | 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 1 and 3

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 paragraphs 1 and 2 of Schedule 28 to,Finance Act 2004

Pension rules 1 and 3 referred to in NIM02766 are as follows:

Pension rule 1

No payment of pension may be made before the date on which the employee reaches normal minimum pension age unless the ill-health condition was met immediately before the employee became entitled to a pension under the scheme.

Here:

• “normal minimum pension age” means: before 6th April 2010, age 50, on or after that date, age 55 (section 279(1); PTM062100

• “ill-health condition” means: the person responsible (NIM02765) for the employer-financed retirement benefits scheme (“EFRBS”) has received evidence from a registered medical practitioner that the employee is, and will continue to be, incapable of carrying on their occupation because of physical or mental impairment; and the employee has, in fact , ceased to carry on their employment (paragraph 1 of Schedule 28; PTM062100).

Pension rule 3

In respect of a defined benefits arrangement, the only pension that it may pay is a scheme pension.

Here:

• “defined benefits arrangement” means an arrangement under which all the benefits that may be provided to the employee are “defined benefits” (section 152(6))

• “defined benefits” means benefits which are not money purchase benefits: that is, they are calculated by reference to: the employee’s earnings or length of service, or any other factor other than an amount available for the provision of the benefits (section 152(7)).

• “scheme pension” means a pension payable to an employee which:is payable by either the responsible person (see NIM02765) or an insurance company and is payable at least annually for life, or the later of the employee’s death and a guaranteed set period of up to 10 years is not capable of being reduced year on year, except in specified circumstances (paragraph 2 of Schedule 28; PTM062310 and PTM062320).

For details of pension rules 4 see NIM02768.