Personal Tax

Private pension income

Produced by Tolley
  • 19 Oct 2021 22:40

The following Personal Tax guidance note Produced 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

Private pension income

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:

  1. occupational pension schemes to which the employee and / or employer contribute

  2. 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 are defined contribution schemes and most new joiners to occupational schemes (outside the public sector) will find themselves in such schemes.

Major changes were introduced from 6 April 2015 to the ways in which members of defined contribution pension can take benefits.

See the Benefits available from defined pension schemes up to 5 April 2015 and Pension benefits from a defined contribution pension scheme (from 6 April 2015) guidance notes.

Defined benefit schemes

Defin

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