Personal pensions—an introduction
Produced in partnership with Alistair Hill of CMS
Personal pensions—an introduction

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

  • Personal pensions—an introduction
  • Statutory development of personal pensions
  • Core features of personal pensions
  • Features specific to workplace personal pension schemes
  • Establishing and registering a personal pension scheme
  • Operating a personal pension scheme
  • Contributions and tax relief
  • Investments
  • Benefits
  • Transfer values
  • more

Statutory development of personal pensions

Retirement annuity contracts were the predecessor to personal pensions. They were introduced by the Finance Act 1956 to ensure that the self-employed, who could not join an occupational pension scheme, could save for retirement in a tax-advantageous way. They were later extended to include employed persons who were not members of an occupational pension scheme.

Many retirement annuity contracts still exist. However, the concept was significantly reformed by the Finance Act (No 2) 1987, which introduced modern personal pensions. Shortly afterwards, this Act was consolidated in the Income and Corporation Taxes Act 1988, Chapter IV.

For further information, see Practice Note: Retirement Annuity Contracts (RAC)—older types of personal pension schemes.

From 1 October 2001, an occupational or personal pension scheme that meets cost and other criteria set out in the Welfare Reform and Pensions Act 1999 (WRPA 1999) may be registered as a stakeholder pension scheme. In practice, however, almost all stakeholder pension schemes are personal pension schemes. Note that on 1 October 2012, the legal regime applicable to stakeholder schemes changed, with the result that employers ceased to be under an obligation to designate and facilitate access to a stakeholder pension scheme (as set out in the WRPA 1999, s 3).

For further information, see Practice Notes: Stakeholder pension schemes after 1 October 2012—an introduction and Stakeholder