Private pension income

By Tolley

The following Personal Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

Private pension income
Defined contribution schemes
Defined benefit schemes
Tax-free lump sum
Charge to tax
Checking the PAYE codes

A private pension is a generic term which covers any pension scheme other than the state pension. The most common types of private pension are:

•occupational pension schemes to which the employee and / or employer contribute
•personal pension schemes, which are either set up by the individual independently or arranged by an employer as a group personal pension scheme

Private pension arrangements fall into two categories: defined contribution and defined benefit, as explained below.

For information on the state pension, see the State pension guidance note. For details of pensions paid by foreign payers, see the Foreign pension income guidance note.

Defined contribution schemes

Defined contribution pension schemes (also known as money purchase schemes) are schemes where the pension benefits paid out are dependent on the contributions paid and the growth in the value of the pension fund over the period between paying the contributions and taking the pension. All non-occupational schemes a