PSI4.15 - Introduction: Historical Review of Revenue Legislation - Finance Act 1989

(This archived guidance relates to HMRC discretionary practice before the 6th April 2006. For current guidance on Registered Pension Schemes see the Registered Pension Schemes Manual)

The Finance Act 1989 introduced a further major tax reform package for pensions. The major changes were:

1. The statutory requirement for approval (section 590(7) ICTA 1988) that all other schemes for that class or description of the employer's employees must also be approved was repealed. This allowed the introduction of non-approved "top up" schemes (see PSI 1.2.3).
2. The introduction of a statutory permitted maximum on earnings pensionable through an approved scheme (known as the "earnings cap").
3. The introduction of a revised maximum on the approvable accelerated accrual of lump sum retirement benefits amounting to 2.25 x the initial pension payable.
4. The facility to allow any over-provision for a member arising from the payment of additional voluntary contributions to be repaid subject to a tax charge on the excess contributions returned.