A change of practice concerning contributions to personal pensions has been announced. With Pensions Update No 130 today, the Revenue has formally published details of a relaxation first communicated to the ABI at the beginning of March 2002. Up to now, it has been the view of SPSS that where an individual nominates a basis year to support contributions above the £3,600 threshold for a later tax year, the net relevant earnings of the basis year are subject to the earnings cap applying in the basis year.

Following lobbying by the ABI and others, SPSS has acknowledged the difficulties involved in having to renominate a later tax year in order to take advantage of the higher earnings cap. They also recognised the anomalous position of the self-employed for whom the basis year will always be one year behind (as they are generally unable to use the current year as the basis year).

Consequently, with immediate effect the Revenue has decided to allow the earnings cap applicable to the payment year to apply instead. This means that an individual who regularly earns more than the earnings cap will not have to renominate the basis year every year, simply to take account of the annual increase in the cap.