Pension Schemes - Frequently Asked Questions
Questions on Update 132 (Improper Transfers: Trust Busting)
- Will you please clarify the position relating to "written
permission" in paragraph 14 of the Update?
- Paragraph 19 says that transfers are not to go via a
broker. Does this mean that the cheque should not be made payable to
the broker or that the cheque should not be sent via the broker?
- Paragraph 19 says that transfers are not to go via a
broker. Does this mean that a broker should not be involved at all in
the transfer process?
- Many independent brokers are employed by scheme trustees
to provide third party administration services for their pension arrangements.
These services may or may not include the operation of the Scheme Trustees'
bank account. In this event is it acceptable for transfer cheques to
be forwarded via the broker in their capacity as scheme administrator?
- An independent broker is often the scheme administrator
of a self-invested personal pension scheme receiving a transfer, so
a transfer cheque could be forwarded via and made payable to the broker.
Is this satisfactory?
- With reference to paragraph 18 how do we check that financial
institutions fall within S632(1) ICTA 1988?
- Open market options from personal pension schemes are often arranged, not by purchase of an annuity contract by the personal pension scheme administrator, but by a transfer payment followed by immediate payment of benefits from the receiving personal pension scheme. Can the transfer cheque be received by the broker in this situation?
Q. Will you please clarify the position relating to "written permission" in paragraph 14 of the Update?
A. In all cases where a transfer is to be made to a LSAS written permission authorising the Inland Revenue to give the scheme making the transfer confirmation or otherwise that the receiving scheme is a tax approved LSAS must be given (by the receiving scheme) and obtained (by the transferring scheme) before the transfer takes place. The Update places an obligation on the transferring scheme to obtain the permission and an obligation on the receiving scheme to give the necessary permission.
Q. Paragraph 19 says that transfers are not to go via a broker. Does this mean that the cheque should not be made payable to the broker or that the cheque should not be sent via the broker?
A. The cheque should not be sent via a broker and should not be made payable to a broker. If the receiving scheme is an insured scheme the cheque should be made payable to the Life Office and be sent straight to the Life Office. If the receiving scheme is a LSAS or a SSAS the cheque should be made payable to the trustees of the receiving scheme and should be sent straight to them. PN 6.12 is unchanged and brokers may receive cheques when they are co-ordinating the purchase of an open market annuity on the occasion of a member's retirement.
Q Paragraph 19 says that transfers are not to go via a broker. Does this mean that a broker should not be involved at all in the transfer process ?
A. No. The Update does not exclude a broker from the transfer process. Brokers may continue to be involved in the administration of the transfer process as they were prior to Update 132 provided transfer cheques are not sent via the broker and provided cheques are not made payable to the broker.
Q. Many independent brokers are employed by scheme trustees to provide third party administration services for their pension arrangements. These services may or may not include the operation of the Scheme Trustees' bank account. In this event is it acceptable for transfer cheques to be forwarded via the broker in their capacity as scheme administrator?
A: Transfer payments may be sent via independent brokers who provide third party administration services to the scheme trustees but only where these services include the operation of the scheme trustees' bank account. Where the bank account is not operated by the third party administrator transfer payments must be made directly to the receiving scheme bank account or via the scheme trustees.
Q. An independent broker is often the scheme administrator of a self-invested personal pension scheme receiving a transfer, so a transfer cheque could be forwarded via and made payable to the broker. Is this satisfactory?
A: If an independent broker is acting as the appointed scheme administrator within a self-invested personal pension scheme, then the transfer value may be made payable to and forwarded via the broker. Where an independent broker is formally acting on behalf of the appointed scheme administrator as described in the previous question, again the broker may receive the payment.
Q. With reference to paragraph 18 how do we check that financial institutions fall within S632(1) ICTA 1988?
A: In practice, the broker may be used to dealing with many of the life offices and banks who are providers of personal pension schemes. Where the provider is known to the scheme administrator, no special check need be made. In other cases, it will be sufficient for the status of the provider to be verified within correspondence with the scheme concerned.
Q. Open market options from personal pension schemes are often arranged, not by purchase of an annuity contract by the personal pension scheme administrator, but by a transfer payment followed by immediate payment of benefits from the receiving personal pension scheme. Can the transfer cheque be received by the broker in this situation?
A: Where an open market option is exercised under a personal pension
scheme in the normal way (IR 76 paragraph 9.4) then the cheque may be
processed via a broker. Where a transfer payment is being made as you
describe and is paid to a personal pension scheme (IR 76 Part 12) and
the transferring scheme administrator is satisfied that benefits are to
come into payment immediately, there will be no objection to the transfer
cheque being paid via the broker.
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