PSI7.1.18 - Increases of Pensions in Payment: General - Old Code Funds

(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)

Section 608 ICTA 88 allows continuing exemption from tax on the investment income, commissions, profits and gains of a pension fund approved under legislation in force before Finance Act 1970 (see Introduction 4.1-4.5) and which has not applied for approval under current legislation. This exemption is, however, subject to certain conditions. They are that:-

1. no contributions have been paid to the fund since 5 April 1980; and
2. no alterations have been made since 5 April 1980 to the terms on which benefits are payable.

[M119]

A fund altering or introducing provisions for giving post-retirement increases in payment would therefore lose its continuing exemption by virtue of ii. above. On 19 January 1994, the Inland Revenue published an Extra Statutory Concession which permits these old funds to alter their rules to provide post-retirement increases to pensions in payment on the basis of an amount not exceeding the rise in the Retail Prices Index or at a fixed rate of up to 3 per cent per annum compound (whether or not the increase in the Retail Prices Index reaches that level), without losing their continuing exemption from tax.