taxation
If a pension scheme meets certain conditions laid down by the Inland Revenue, it will have exempt approved status, which brings many tax advantages. Employers' and employees' contributions attract tax relief. The employers' contribution is not taxed as a benefit in kind in the hands of the employee. Capital gains earned on the pension fund are tax free, as are lump sum death benefits and lump sum retirement benefits. Pensions in payment are taxable as earned income.
A scheme must meet many detailed conditions to achieve approved status. In particular, there are upper limits on the benefits that approved schemes may provide, and upper limits on the contributions that attract tax relief.