Pensions Tax Simplification Newsletter No 22

30 November 2006

Contents

1. Introduction

Welcome to the twenty second edition of the Newsletter.

Please pass this Newsletter on to anyone else in your organisation who you think may find it useful.

2. Use of P60 (Substitute) for information on Lifetime Allowance

We have been receiving requests about what should be stated on a form P60 (Substitute) about the amount of lifetime allowance used-up by a benefit crystallisation event (BCE). These requests have, quite rightly, been submitted to the Substitute Forms Examiner at HMRC, Somerset House in accordance with RPSM12303030 (pensions paid by registered pension schemes) or RPSM12306020 (annuities paid by insurance companies).

The position is that, whereas annual information about the percentage of lifetime allowance (LTA) used by the pension (and, if applicable, a pension commencement lump sum) is required under the Registered Pension Schemes (Provision of Information) Regulations SI 2006/567, it is not an HMRC requirement that such information is included in the P60 (Substitute) in particular. This is in contrast to other information, under PAYE regulations for example, which may be prescribed as necessary on the P60. Nonetheless, where LTA information is to be included, it needs to be agreed with the Substitute Forms Examiner.

To assist with the processing of the LTA information, we have advised the Examiner that the information should show the percentage of the standard lifetime allowance expended by the benefits concerned. Where the pensioner has an enhanced lifetime allowance, it is still the standard lifetime allowance which should determine the percentage. And, as stated in RPSM11103330, the percentage can be shown to two decimal places, rounded down.

So long as the actual LTA percentage being provided meets the requirements as set out in RPSM12303000 onwards or RPSM12306000 onwards, the exact wording used can be simple. And we recognise, for example, that fuller information may be being given to the pensioner by other means, such as accompanying notes. Or that other percentages in relation to other benefits of the member under the same registered pension scheme may be being certified on other forms.

So the Examiner will accept wording such as ‘Standard lifetime allowance used = xx.xx%‘ (or x.xx% or xxx.xx%)

Where the amount shown includes the amount used-up by a pension commencement lump sum, as well as a pension, any impression that the amount relates to the pension only should be avoided. And as the percentage will remain valid for future years, despite changes to the standard lifetime allowance (unless for example transfers are made) it is not necessary to refer to the current standard lifetime allowance - see RPSM11100040).

If the pension is one which came into payment before 6 April 2006 i.e. a relevant existing pension (see RPSM11104910), the payer of the pension should not show the pension as using–up lifetime allowance. This is because the payer is specifically exempt from providing LTA information (see exceptions in RPSM12303030) despite the fact that a relevant existing pension may be regarded as using-up lifetime allowance from the time of the first actual BCE on or after 6 April 2006, if such a BCE occurs (see RPSM11104920). Given that it may therefore be misleading to show a Nil percentage of LTA, it would be better if the payer of the pension did not make any reference to LTA on the form. But if systems are such that this is not possible, then a suitable note to the effect that LTA information is not shown as the pension started before 6 April 2006, under exceptions on RPSM12303030, would suffice.

Submissions made to the Substitute Forms Examiner may therefore want to take these points into account.

3. Age Discrimination – The Employment Equality (Age) Regulations 2006

On 8 September 2006 the Minister for Pensions Reform James Purnell announced that the pension provisions of the Employment Equality (Age) Regulations that came into force on 1st October this year would not now come into force until 1 December 2006. This was in response to concerns voiced by industry and employers and gave schemes more time to adjust to the new regulations following significant activity in the pensions sector brought about by the introduction of the simplified tax regime on 6 April this year.

On 11 October DWP published an amended set of regulations relating to the pension provisions in Schedule 2 for a short informal consultation period to assess whether the proposed amendments provided the clarity requested by schemes and employers or if in fact more was needed. The consultation period closed on 20 October. Following consideration of the responses received DWP laid an amended set of regulations before Parliament on 10 November.
HMRC can confirm that as far as the tax rules are concerned the changes have no adverse effect on registered pension schemes. The extension to the coming into force date for the pension provisions is in accordance with European Law and the deletion of paragraph 30(2) of Schedule 2 does not put employers and schemes at risk from claims of discrimination being made against them.

With regard to the normal minimum pension age provisions, The Employment Equality (Age) Regulations 2006 do provide an exemption for the setting of minimum ages for taking pension benefits in order to comply with the pension tax legislation under Part 4 of the Finance Act 2004 (FA04). The deletion of paragraph 30(2) merely seeks to add clarity and certainty for schemes to rely on the exemption in paragraph 30 of Schedule 2 to the Age Regulations when setting minimum ages for payment of benefits. Paragraph 30 exempts from action under the regulations anything done to secure any tax relief or exemption available under Part 4 FA04 or to avoid a charge to tax under that Act.

4. Pension Schemes Online – New functionality available

The following functions are now available on Pension Schemes Online

  • Register to operate Relief at Source for a particular scheme
  • Amend Relief at Source details held on Pension Schemes Online
  • View an individuals lifetime allowance certificate

Relief at Source

Scheme Administrators can at the same time as they register a new pension scheme with HMRC, register to operate relief at source. After the details for the new scheme have been provided online, Scheme Administrators are given the option on screen of also registering for relief at source.

Alternatively they can do this at any time after the scheme has been registered. To do this, the Scheme Administrator must select the relevant scheme from their Welcome page and then on the Pension Scheme Summary page select ‘Register for Relief at Source’ in the ‘Registration area’ and follow the online instructions.

In both cases Scheme Administrators will be presented with an Authorised Signatories page. If they choose to use this to provide the signatures they will need to select the ‘printer friendly version’ of the page so that this is printed off. This page must then be signed by the authorised signatories and sent to Audit & Pension Schemes Services, Nottingham at the address below.

Joint Registrations

If a Scheme Administrator registers a new pension scheme and registers for relief at source at the same time, a pension scheme tax reference (PSTR) will only be generated at the point the joint submission is made. This means that the page for authorised signatories that can be printed off and sent to Audit and Pension Scheme Services will not include the PSTR in the details of the pension scheme. It would assist our customer service if the Scheme Administrator could advise us on this form of the PSTR for the pension scheme when they return the authorised signatories information in these circumstances.

LTA Certificates

If an individual is a member of a pension scheme, and a benefit crystallisation event occurs, the Scheme Administrator may need to view information on their LTA certificate(s). If an individual wishes to authorise a Scheme Administrator to view their certificate(s) online they must advise HMRC using the form provided or by letter.

Individuals can authorise a Scheme Administrator to view their certificate(s) by completing and submitting form APSS203 (PDF 63K) to Audit & Pension Schemes Services, Nottingham at the address below. The Scheme Administrator will be able to view the LTA certificate when the authorisation request has been actioned by HMRC. This authority will last for a period of 90 days from when HMRC actions it. If further authorisation is required beyond this period, the individual will need to complete another APSS203.

The Scheme Administrator can access the certificate(s) by selecting ‘View LTA certificate’ under ‘Individuals’ in the ‘Select an action’ area of their Welcome page. The Scheme Administrator will then be required to enter the certificate reference number, the individuals surname and date of birth to view the certificate(s).

Scheme Administrators will not be able to view online any temporary LTA certificates issued. For those individuals who have received temporary certificates, APSS staff have now started a programme of replacing these with permanent certificates as outlined in the previous newsletter.

5. APSS200 Forms

To allow APSS to process LTA protection notifications as quickly as possible for you, it is necessary for you to enter information into every box of the relevant Part(s) of the notification form APSS200 (PDF 66K). If you leave the boxes blank we do not know whether this is because the value is nil, not applicable or you have simply overlooked it. We will therefore have to return it to you to confirm which of these apply. This then delays your receiving the certificate. To avoid this simply enter ‘nil’ or ‘not applicable’ whichever applies rather than leaving it blank.

6. Pre A-day forms

In Newsletter 19 we explained that we would no longer accept information provided about events that have occurred on or after 6 April 2006 on forms that are only applicable to events happening on or before 5 April 2006. This Newsletter now clarifies the position with regard to how information required about events which occurred on or before 5 April 2006 should be provided.

Up to and including 5 April 2006 the participation of an employer in a scheme had to be notified to us in accordance with the Retirement Benefits Schemes (Information Powers) Regulations 1995 on the form prescribed by HMRC. A time limit of 180 days after the end of the scheme year in which the event took place applied to these notifications. This time limit ceased at the very latest in October 2006. This means there is no longer any need for these prescribed forms to be available. We have therefore withdrawn them and as from today will no longer accept them.

We appreciate that it may be possible some events which occurred on or before 5 April 2006 may not have been notified to us yet. From today if you have not already provided this information you will need to use the following means to do so:

  • If you want to report a change of name and/or address for a principle employer you should use the Amend Scheme details form APSS152 (PDF 67K)
  • If you want to report a change of a principle employer you should use the Amend Scheme details form APSS152 (PDF 67K)
  • If the scheme was wound up on or before 5 April 2006 we require notification that the scheme has wound up and the date that this was complete. The appropriate form for the submission of this information is now the APSS300 (PDF 108K) If it is not possible to have the form submitted by the Scheme Administrator, submission by the practitioner will be acceptable in these circumstances only.
  • For any other events that occurred on or before 5 April 2006 that are required to be notified but have not been you should write/email to APSS with details of the event.

7. Small Occupational Pensions

Prior to April 2005, new pensions above and below the PAYE threshold were treated differently if the pensioner didn’t provide a P45 - but the distinction was withdrawn in April 2005.

In all cases where the pensioner doesn’t provide a P45, employers/pension payers were required to operate the P46 procedures which had previously only applied to pensions above the PAYE threshold. This change was covered in paragraph 21 of CWG2 (2005) Employer’s Further Guide to PAYE and NICs.

However, HMRC are aware that some employers/pension payers haven’t adopted the revised procedures so we plan to remind you via the February Employer’s Bulletin, CD ROM and other communications.

Consequently, for new pensioners from next April, local agreements for small pensions should cease. All pensions which employers/pension payers start to pay from 6 April 2007 should be notified to HMRC on form P46 or P160 or the electronic equivalent, the PENNOT. This instruction overrides any informal arrangements that you may have had with your local HMRC office that have operated in the past.

HMRC are also looking at how best to bring existing small pensions into PAYE. This is likely to involve asking you for lists of pensioners for whom PAYE is not currently operated or for whom code NT is operating under a locally agreed arrangement as many of these will not be on our database.

HMRC will contact you in due course to discuss how we propose to take this forward.

If you have any questions about this, you should contact your local HMRC office, not APSS.

8. 1SF Forms

If you have any 1SF forms outstanding for the tax year 2004/05 and any earlier years, these should be sent to:

Luke Saxton
Audit & Pension Schemes Services
Yorke House
Castle Meadow Road
Nottingham
NG2 1BG

together with the appropriate remittance. If you need any assistance please call Luke on 0115 974 1665.

The 1SF should not be used for tax charges incurred on or after 6th April 06.

The only exception is where the tax charge is incurred as a result of an authorised ‘pipeline lump sum’ payment – see the answer to the question ‘I normally submit 1SF/2SF/3SF, should I still be doing these?’ from the Accounting for tax return and Online filing article published as part of the Pension Simplification Newsletter 20 for further guidance.

9. Contact Us

If you have any questions about anything to do with new tax rules and you can’t find the answer in the Registered Pension Schemes Manual, please contact APSS by e-mail or phone our helpline number 0115 974 1600 (9.00 to 17.00 Monday to Friday) or you can write to us at

Audit & Pension Schemes Services (APSS)
Yorke House
Castle Meadow Road
Nottingham
NG2 1BG

Please note that APSS only deals with matters relating to the administration (including any technical issues) of Pension Schemes and where tax is due from the scheme. Any resulting impact on the tax position of a member or the establisher/sponsoring employer continue to be dealt with by the appropriate local tax office and you should contact them if you have any queries about this, rather than APSS.