(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)
Scheme rules often use terms such as "pensionable
remuneration" as part of the formula for calculating benefits, or
as the basis for employees' contributions. You may sometimes be
asked whether a particular item can be included as pensionable
remuneration and therefore ultimately form part of "final
remuneration". Remuneration can be received or deemed to have been
received in many forms ranging from basic wages and salaries to
obscure benefits in kind. The basic principle is that to the extent
that the payment or benefit is assessable to income tax under
Schedule E it is pensionable remuneration but there are exceptions.
"Golden Handshakes" etc (see
PSI6.4.5) and share options etc (see
PSI6.4.4) although taxable are not
pensionable. Conversely, the value of accommodation which the
employee is required to occupy as a condition of employment
although non-taxable is pensionable. The following lists contain
some examples of items which are either acceptable or unacceptable
for inclusion as pensionable. The lists are not exhaustive and if
you encounter something which does not appear in them you should
consult SF70/22 and/or SF70/78. It may be necessary to approach the
Inspector of Taxes to determine how the particular item has been
treated for tax purposes. If following these consultations you are
still in doubt or unsure how to proceed, refer the matter to your
Section Manager for advice.
| Acceptable | Unacceptable |
| *Profit related pay (whether or not taxable). | Share options etc acquired on or after 17 March 1987 (see PSI6.4.4). |
| Remuneration paid in form of units in a unit trust (providing rules allow and units taxed as Schedule E emoluments of recipient). | Remuneration paid in the form of shares. |
| *Remuneration paid via discretionary trusts (subject to proviso above). | Anything chargeable under section 148 ICTA 1988 (see PSI6.4.4-5). |
| Remuneration paid in form of Government Securities (subject to proviso above). | An early retirement pension in payment from the employer. |
| *Employer's contributions to a "top-up" scheme (see PSI1.2.3) (subject to proviso above). |
|
| *These items to be treated as fluctuating emoluments. |
|
