PSI6.4.15 - Total Benefits on Retirement at Normal Retirement Age: Pensionable Remuneration and Final Remuneration - Acceptable Definitions

(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)

(This text has been withheld because of exemptions in the Freedom of Information Act 2000)

[PN Glossary]

PSI6.4.3explained that the statutory definition of "final remuneration" is obligatory for schemes seeking mandatory approval under section 590 ICTA 88. But for schemes seeking discretionary approval under section 591 we do not insist on the average annual remuneration of the last 3 years' service. Instead, the Glossary to PN sets out two basic definitions of final remuneration which are permissible:

1. The highest remuneration upon which tax liability has been determined for any one of the 5 years preceding NRD. "Remuneration" means the basic wage or salary for the year in question, plus the yearly average over a suitable period of any fluctuating emoluments such as commission or bonuses. This period should cover at least 3 consecutive years and end on the last day of the year chosen for basic pay. Fluctuating emoluments of a year other than the basic pay year may be increased in proportion to the increase in the Retail Prices Index from the last day of that year up to the last day of the basic pay year (see also PSI6.4.33).

Remuneration that is received after NRD and upon which tax liability has been determined is treated as a fluctuating emolument provided it was earned or qualified for prior to NRD. In these circumstances it can be included provided the yearly average of 3 or more consecutive years begins no later than the commencement of the basic pay year, or

1. The yearly average of the total emoluments from the employer which are assessable to income tax under Case I or II of Schedule E and upon which tax liability has been determined for any period of 3 or more consecutive years ending not earlier than 10 years before NRD. Where such emoluments are received after NRD but are earned or qualified for prior to that date, they may be included provided that in these circumstances the yearly average of 3 or more consecutive years begins no later than the commencement of the year ending with NRD.