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RE277 - Personal Pension Relief: Contributions

Contributions to a personal pension scheme may be made by

  • the member
  • the member's employer
  • the DSS (see RE296 on `contracting -out').

The contributions made by the member and the employer are aggregated for the purposes of the `percentage limit'. DSS contributions do not count towards the `percentage limit'. It is not possible for individuals to contribute unless they have a source of relevant earnings for the year of assessment in which the contribution was paid (or treated as paid). An individual with no relevant earnings cannot contribute and choose not to claim tax relief.

Where an employee has left a company pension scheme after less than two years' service and has received a refund of contributions (or no benefit if the scheme was non-contributory), he/she may contribute to a personal pension scheme in respect of that period.

Individuals with `relevant earnings' which are chargeable to UK tax, but who do not actually pay any tax because

  • their personal allowances reduce the tax payable to NIL,


  • their earnings are subject to the 100 per cent Foreign Income Deduction, or
  • they are covered by the terms of a Double Taxation Agreement

may contribute to a personal pension scheme in the normal way.

Individuals who are living abroad and are no longer chargeable to UK tax cannot continue to make contributions unless

  • they have unused relief available from earlier years and
  • they submit a valid election under Section 641 (4) (a) or (b) to carry back to a year in which they did have a source of `relevant earnings' chargeable to UK tax.

It is also possible for an individual who is a member of a contracted-in occupational pension scheme to have DSS Minimum Contributions paid to a personal pension scheme. No other contributions may be paid whilst he/she remains in pensionable employment (ICTA88/S638 (8) (b) ).