Pension Schemes – Notional Earnings Cap
HMRC have stated that the pension scheme notional earnings cap for 2010-11 will remain at £123,600.
This is the last time that HMRC will publish a notional earnings cap. Going forward, pension schemes that need to calculate a notional earnings cap will be required to do so using the method shown in section 590C of the Income and Corporation Taxes Act 1998.
The Earnings Cap was originally introduced in 1989-90 to set a ceiling on the amount of benefits that could have been paid by certain pension schemes. The rules for pensions changed on 6th April 2006 when the earnings cap was replaced by the lifetime allowance and the annual allowance limits. However, the notional earnings cap remains a feature of many pre-existing company and public sector pension scheme rules as a measure they use to restrict benefits payable.