What does section 590 of the Income Tax (Earnings and Pensions) Act 2003 do?

Section 590 charges income tax on annuities paid from former approved superannuation funds. These are older occupational pension schemes originally approved under section 208 of ICTA 1970 that lost their formal approval when the retirement benefit schemes code took full effect in 1980. The section mirrors the approach used in section 580 to identify the relevant arrangements.

What is a former approved superannuation fund under United Kingdom tax law?

A former approved superannuation fund is an occupational pension scheme originally approved under section 208 of the Income and Corporation Taxes Act 1970. These schemes lost approved status when Chapter 1 of Part 14 of ICTA 1988 took effect in 1980, but could retain fund income tax exemption if no further contributions were paid and no rule changes were made.

Are annuities from former approved superannuation funds subject to income tax?

Yes. Under section 590 of the Income Tax (Earnings and Pensions) Act 2003, annuities paid from former approved superannuation funds are brought within the charge to income tax. The annuity is taxed as the recipient's income for the tax year in which it is received, even though the fund itself may remain exempt from tax on its own income.

What conditions must a former approved superannuation fund meet to keep its fund income tax exemption?

Two strict conditions must be satisfied for the fund to retain exemption from income tax on its fund income. First, no further contributions may be paid into the scheme after it lost approved status in 1980. Second, the rules of the scheme must not be altered. If either condition is breached, the fund income exemption is lost.

Income Tax (Earnings and Pensions) Act 2003 section 590

Annuities

Section 590 deals with the tax treatment of annuities paid from former approved superannuation funds — older occupational pension schemes that lost their formal approval in 1980.

Annuities paid by former approved superannuation funds are subject to income tax
A former approved superannuation fund is an occupational pension scheme originally approved under section 208 of ICTA 1970, which lost its approval when the retirement benefit schemes code took full effect in 1980
These funds can still remain exempt from income tax on their fund income, but only if no further contributions are made and no changes are made to the scheme rules
The section uses the same approach as section 580 to identify the arrangements under which the annuities are paid

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