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5.8 Concurrency
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The policy of concurrency means that from 6 April 2001 certain active members of occupational pension schemes have been able to also contribute to a personal pension, Stakeholder pension or money purchase occupational pension scheme that has converted to the new defined contribution tax regime.
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Concurrent membership is not be available if:
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the employee is a controlling director (i.e. a director
controlling directly or indirectly at least 20% of company's
share capital), or has been a controlling director in any
of the previous five tax years. For this purpose, years
prior to 2000/01 will be ignored
or
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the employee's "grossed-up remuneration" exceeds
£30,000 pa in any one of the previous five tax years.
Again, no period before the 2000/01 tax year will be taken
into account.
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Provided an employee does not fall within the two categories outlined
above, concurrent membership is allowed.
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The phrase "grossed-up remuneration" refers to a situation
where an individual has been employed for less than a full tax year.
In such circumstances the figure is calculated by dividing the number
of months (including part months) in employment by twelve, and multiplying
the resultant figure by £30,000. The £30,000 grossed-up
remuneration threshold is officially called the "remuneration
limit". It may be amended by Treasury Order in the future.
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Where concurrent membership is acceptable, contributions of up
to £3,600 pa may be paid for at least the next five years
to a personal pension, Stakeholder pension or a money purchase pension
scheme, which is subject to the new defined contribution regime.
These contributions may be made in addition to personal contributions
of up to 15% remuneration paid to the occupational scheme.
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The limit of £3,600 on concurrent contributions includes
basic rate tax relief. The £3,600 limit applies to the total
aggregate contribution made by, or on behalf of, the employee. Any
contribution made directly by the employer would therefore be included
within the £3,600. The £3,600 limit is officially called
the "earnings threshold" and may be amended every year
by a Treasury Order.
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Benefits arising from concurrent contributions will not be taken
into account by the Inland Revenue, when assessing Inland Revenue
maximum benefit limits under the occupational scheme, provided that
contributions cease due to retirement.
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