PSI5.1.17 - Contributions by Employers: General - Adequacy of Contributions - Employer's Main Scheme

(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)

[PN5.1]

Section 590(2)(d) does not specify a minimum level of employer's contribution. But for the scheme benefits to be "relevant benefits" the contributions must be sufficient for the emerging benefits to be regarded as "given" in respect of past service. In practice, for schemes operating through a common trust fund (see PSI1.1.19), we look for a minimum contribution of 10% of the total cost of the scheme ( PSI5.1.20-24). In schemes where contributions are calculated separately for each member, ie individual arrangements ( PSI1.1.16), earmarked schemes ( PSI1.1.18) and small self- administered schemes, this criterion must be applied to each individual member of the scheme in order to justify his or her membership. It is not sufficient for the employer to pay an average of more than 10% in relation to the scheme as a whole. The 10% minimum contribution requirement relates to each year but the year does not have to be a tax year. It may be a scheme year, calendar year etc. Whatever type of year is chosen, however, it must be consistently used throughout the life of the scheme. The 10% criterion does not however apply where the employer is taking a contribution holiday as part of agreed action to reduce an excessive surplus in accordance with the options available under paragraph 3, Schedule 22, ICTA 1988.