Earnings cap and stakeholder pensions

Further to my article 'Use It Or Lose It' (Taxation 2 November 2000 at pages 124 to 126) I have received a number of enquiries concerning the application of the 'basis' year (see section 646B Taxes Act 1988) which allows the contributor to base his or her contributions on the net relevant earnings of one of the previous five years.

There appears to be confusion (confirmed in correspondence with the Pension Schemes Office) over whether the net relevant earnings of the chosen basis year are limited by the earnings cap of that year or the cap for the current year. In my article I gave an example using the current year cap. However the Revenue has since confirmed that in its view it is the earlier year's cap that is relevant.

The Revenue's position is based on the wording of