Adult Dependant Children’s Pensions – transitional provision

Under the tax rules applying to registered pension schemes which came into effect from 6 April 2006 ('A Day'), a pension paid to a child of a deceased member of a registered pension scheme must cease when that child reaches age 23 (unless the child qualifies for a dependant’s pension on grounds of incapacity or the pension is covered by Article 34 of ‘The Taxation of Pension Schemes (Transitional Provisions) Order 2006’). But under the tax rules that applied before 6 April 2006, a few pension schemes paid dependant’s pensions to adult children too old to fall within either the definition of 'dependant child' or the current transitional provisions. Typically these are adult children carers who looked after an elderly parent. Under the current rules paying these pensions result in 'unauthorised payments' subject to tax charges.

A draft Order has today been issued for consultation which will extend the transitional provision so they cover such pensions in payment on or where the entitlement to the dependents pension arose before 1 July 2008 ('Announcement date').

Comments on the Order should be sent to David Dodd, Room G63, 100 Parliament Street, London, SW1A 2BQ, or emailed to David Dodd by close on Thursday 31 July 2008.