Investments for personal pensions
Produced in partnership with Alistair Hill of CMS

The following Pensions practice note produced in partnership with Alistair Hill of CMS provides comprehensive and up to date legal information covering:

  • Investments for personal pensions
  • Investment strategy
  • Tax relief on investment income and gains
  • Tax-related investment restrictions
  • Avoiding an unauthorised member payment
  • Value shifting
  • Taxable property
  • Removal of contracting-out investment restrictions
  • Trust law considerations
  • Insurance-based personal pensions
  • More...

Before 6 April 2006, personal pension schemes were specifically required to provide retirement benefits on a money purchase basis in order to be HMRC approved arrangements.

No such restriction now exists, but this former requirement, coupled with the original shortlist of authorised providers, has had a practical impact on the investment structures and strategies that are commonly available in the marketplace for personal pensions.

Investment strategy

Unlike trustees of occupational pension schemes, contract-based pension providers are not required to prepare a Statement of Investment Principles (SIP). The main public document for contract-based providers is the independent governance committee (IGC) annual report. IGCs are required to act in the interest of policyholders. Their main function is to assess value for money, but the content of the annual report goes further than this. For example, it includes how the IGC has considered policyholders’ interests more generally. It must also set out the arrangements the pension provider has put in place to ensure that the views of policyholders are directly represented to the IGC.

For further information, see Practice Note: Independent governance committees (IGCs) and pensions.

Tax relief on investment income and gains

Investments held for the purpose of any registered pension scheme (including personal pensions) are the subject of a number of important tax exemptions, the most important being that:

  1. income derived from investments or deposits is exempt from income tax, and

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