PSI20.3.10 - Funding and Surpluses: Insured
Schemes - General - Methods of Funding
-
(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)
Traditionally there are 3 main ways in which insured schemes
are funded:-
- a series of “single premiums”
(this is also known as the “current cost” method),
- “level annual premiums” (also
known as the “annual premium” method),
- controlled funding - which is in essence a
regime for applying the premiums paid.
From 1 September 1994 the method of funding in b. was replaced
by a rising scale basis tied to individual earnings levels (subject
to the earnings cap where appropriate) for all insured money
purchase schemes and arrangements. This replacement method of
funding is explained more fully in Section 4 of this Part. The main
features of each of the methods referred to above are briefly
explained in the following paragraphs.
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