Income Tax (Earnings and Pensions) Act 2003 section 637

Exemption of lump sums under tax-advantaged pension schemes

Section 637 exempts certain lump sum payments made under tax-advantaged pension schemes from income tax, provided specific conditions are met.

• Lump sums paid under approved pension schemes, personal pension arrangements, retirement annuity contracts and certain statutory schemes are exempt from income tax
• The exemption only applies where the lump sum has been earned through service or where the individual has lost their job or suffered a loss of earnings due to ill health
• For retirement annuity contracts, the exemption is limited to lump sum payments that satisfy the specific conditions for approval set out in the relevant legislation
• The section covers a range of scheme types including approved retirement benefits schemes, relevant statutory schemes, former approved superannuation schemes and approved personal pension arrangements