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Simplification of Tax Treatment for Defined Contribution Schemes

United Kingdom
23/09/1999
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The 6th Stakeholder consultation paper has now been published. It deals with the taxation of both stakeholder schemes and all other defined contribution arrangements.

In general terms it is proposed that the contribution limit to defined contribution schemes will be the greater of £3,600 or the current age related limits which apply to personal pension schemes (these are on a sliding scale starting at 17.5% for employees under age 30 rising to 40% for employees aged 61 or more).

Contributions will be permitted after an employee has left service. For the first 5 years after leaving, they will be limited to either £3,600 or the relevant percentage of earnings which the individual could contribute in either the year of leaving service or the previous 2 years.

However, the existing carry forward and carry back reliefs which apply to personal pension arrangements will be abolished.

Under this proposed regime, concurrent membership of defined contribution schemes will be permitted subject to the overall contribution limit set out above. The trustees of occupational money purchase schemes will be allowed to opt into this regime.

Concurrent membership of a defined benefit scheme and a defined contribution scheme is not proposed: the administration complications required to apply checks for excessive provision being considered too great.

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