Pensions Tax Simplification
Newsletter No. 2 July 2005
Contents
1. Introduction
2. Role of Pensions Industry Working Group (PIWG)
4. Single point of access for the registration of pension schemes
5. Hot topics
a) Registration
6. Latest News
a) Registered Pensions Schemes Manual
b) Policy
7. Contact us
Welcome to the second edition of the Pensions Tax Simplification Newsletter. We were very pleased with the favourable responses we received from the first edition (June 2005) and thank everyone who took the time to comment. The Newsletter keeps pension providers, employers and pension savers informed of new developments in the run up to A-Day. If you are a pension provider or an employer, please make sure that the appropriate people in your organisation read it.
2. Role of the Pensions Industry Working Group (PIWG)
Pensions Tax Simplification has been a collaborative venture between the Revenue and other interested parties. Initially there were four secondees from the pensions industry working with our Policy team to develop the framework for simplification. These secondees were nominated by some of the industry representative bodies. The project has had two major consultation exercises, one in December 2002 that outlined the proposals for the new regime, and the second in December 2003 that went into more detail. In both instances, we have listened to the representations and made changes to the proposals that later became the legislation. As many of you will know, we have also consulted on the draft clauses and are continuing to consult on the proposed regulations.
We have also been keen to involve our customers in the development of the operational plans and business processes resulting from the new regime. So in January 2004, we established the Pensions Industry Working Group (PIWG) as a consultative body comprising key industry stakeholders to work alongside the simplification project. The group meets every 6-8 weeks and includes representatives from the main pensions industry representative bodies and their IT support.
Its main role has been to
- seek customer views on the proposed changes to operating practices and systems arising from the simplified pensions regime;
- discuss evolving operational issues as well as potential solutions;
- better understand the impact that proposed changes may have on customer behaviour and the timescale required to deliver them;
- have an established group that can be used to pilot new business processes and forms.
In addition to this we have also set up a number of sub-groups, as offshoots to the main group, to look at and help with specific issues. For example there is a smaller group looking at the whole issue of data cleansing, see Newsletter No 1 as well as one for the new guidance.
Over the last year and a half, the PIWG has looked at a wide range of topics including the information requirements on the various reports/returns, the role of the Scheme Administrator and practitioner, our online service and the volumes of work expected after 6th April 2006.
We have welcomed the contributions of this group, which have been vital in helping us prepare for a smooth transition to the new regime at 6th April 2006. We very much hope that this partnership will continue up to A -Day and beyond.
The following external bodies are represented at the Pensions Industry Working Group:
- Association of Pensioneer Trustees (APT)
- Association of British Insurers (ABI)
- National Association of Pension Funds (NAPF)
- Society of Pension Consultants (SPC)
- Pensions Management Institute (PMI)
- Association of Pension Lawyers (APL)
- Association of Consulting Actuaries (ACA)
- Association of Independent Financial Advisors (AIFA)
- Institute of Chartered Accountants of England & Wales (ICAEW)
- Chartered Institute of Taxation (CIOT)
- SIPP Provider Group (SPG)
- Institute of Payroll and Pensions Management (IPPM)
- Origo
“Preparing for A-Day” Workshops
With the help of representatives from the pensions industry, we are developing a practical “preparing for A-Day” workshop for those involved in the operational, (rather than technical), aspects of pensions tax simplification to help in their preparations for A-Day. The aim is to give senior operational managers the information they need to help them to prepare for the changes that the new regime will bring. The onus will then be on those attendees to spread the information within their organisations. These workshops will be supported by presentation material that will be available in due course on the Internet for all. A similar but customised set of workshops will also be run for the groups representing advisors.
The workshops will be run in conjunction with the various representative bodies who will also help organise and ensure that the right people are attending. We aim to run the workshops in September and October and are working with members of the PIWG and the sub-group for external communications to set firm dates.
The workshops will include a presentation and demonstration of the new online Pension Schemes Service that includes:
- How to register a pension scheme for tax relief and exemptions
- When and how to make online reports and returns (Registered Pension Scheme Return, Accounting For Tax and the Event Report)
- How to make online payments, and
- How to update the pension scheme records on-line
As well as the demonstration the workshop aims to provide practical information on:
- The role of the Scheme Administrator (as defined in Finance Act 2004), what this involves and does not involve, and the differences between a practitioner and Scheme Administrator
- When a claim needs to be made for transitional protection and how to notify us of this
- What HMRC is doing in terms of cleansing its records and what the pensions industry and practitioners should be doing prior to and post A-Day
- The culture change post A-day and what this means in terms of discretion, scheme rules and the need to communicate any changes to pension scheme members
- Where to find guidance on the new regime and how to use the online Registered Pension Scheme Manual
Your representative body will be advertising these workshops shortly, so look out for further details from them.
4. Single point of access for the registration of pension schemes
The Pensions Regulator and HM Revenue & Customs (HMRC) have been working together to create a single point of access for pension schemes registering on the new on-line HMRC Pension Schemes Service. This will allow a pension scheme to register with HMRC for tax purposes, elect to contract out and to register with the Pensions Regulator in one transaction. It will also enable schemes to do these independently of one another.
We hoped to provide this complete service from 6 April 2006 but have concluded it will not be possible. This is because the main priorities of the Pensions Regulator in its first year are to collect the levy for the Pension Protection Fund, collect and analyse scheme returns and develop, consult on and publish twelve codes of practice and other guidance. We are hoping to include the option to register with the Pensions Regulator from 6 April 2007.
a) Registration of pension schemes already approved
Many of you have asked for further information on how to register existing approved schemes at A -Day, what to do if you do not want an existing approved scheme to be registered and what conditionally approved schemes need to do.
If your scheme is approved under the current legislation you do not need to register it as it will automatically become a registered pension scheme at A -Day and continue to qualify for tax relief and exemption, as it did before 6 April 2006.
If your scheme is approved under the current legislation, and you do not want it to become a registered pension scheme from A -Day, the Scheme Administrator must write to us at HMRC, Audit & Pension Schemes Services, Yorke House, PO Box 62, Castle Meadow Road, Nottingham NG2 1BG. This must be done before 6 April 2006.
The Scheme Administrator is the only person with this authority. Their notification must be in writing and should state that the pension scheme is not to become a registered pension scheme with effect from 6 April 2006. Once this is done, the decision is final and cannot be withdrawn. The Scheme Administrator will need to include the name of the scheme, the name of the principal employer, if appropriate, and the Audit & Pension Schemes Services (APSS) reference number of the pension scheme. A tax charge of 40% based on the scheme’s fund value as at 5 April 2006 will be created.
HMRC will send an acknowledgement to the Scheme Administrator within 15 days of receiving the notification. If no acknowledgement is received the Scheme Administrator should telephone the APSS Pensions Helpline (0115 974 1600).
If the pension scheme has received conditional approval, it will be treated as becoming a registered pension scheme at A- Day unless the Scheme Administrator tells HMRC before 6 April 2006 that the scheme is not to become a registered pension scheme from A- Day. The same information will be required in writing as above and a similar acknowledgement will be sent. Again, the decision is a final one and cannot be withdrawn.
b) Update on data cleanse: process for pre-registration of Scheme Administrators and Authorisation of Practitioners
In Newsletter No. 1 we outlined how we would cut over relevant data on currently approved pension schemes to our new IT database from April 2006. We also said that we would let you know more once we had discussed the processes with the industry.
Our discussions with the Pensions Industry Working Group on the processes have now concluded. The exercise is focused on self-administered schemes but is open to all pension schemes. Taking part in the exercise is entirely voluntary but there are some clear benefits to be gained from participation:
- Scheme Administrators who are pre-registered for the new online Pension Schemes Service will be able to complete registration, view their scheme records and carry out transactions (such as amending scheme records and filing Event Reports and Accounting For Tax Returns) from 6 April 2006. Those that aren’t pre-registered as part of this exercise will need to follow the process that will apply on or after 6 April 2006. This will result in a slight delay in being able to view data or carry out transactions on the online Pension Schemes Service. Information about this is to be provided in a later newsletter.
- To protect the confidentiality of pension scheme information HMRC cannot provide information or viewing rights to a practitioner without authorisation from the Scheme Administrator but as part of the pre-registration exercise the Scheme Administrator will be given the opportunity to give HMRC this authority. The giving of this authority will mean the practitioner will be able to view the pension scheme record online and carry out online transactions such as amending scheme records and filing Event Reports and Accounting For Tax Returns on behalf of the Scheme Administrator from 6 April 2006.
- On completion of the exercise, HMRC, the Scheme Administrator and the authorised Practitioner will all share the same up-to-date information on key pension scheme details.
The main elements of the exercise are:
A. Self-administered pension schemes
- HMRC will contact practitioners held on their database who deal with self-administered pension schemes. They will ask them to contact their self-administered pension schemes to confirm who the Scheme Administrator is.
- The practitioner will do this by asking the Scheme Administrator to
complete and sign a short form which asks for:
- current reference number
- establisher name
- scheme name
- number of scheme members
- their own details (name, address, telephone number and email address)
- The practitioner will be asked to obtain a completed form from each Scheme Administrator of the scheme if there are more than one.
- The short form will also provide the facility to allow the Scheme Administrator, at the same time as providing their details, to give authority to HMRC to deal with a practitioner on their behalf.
- For practitioners with larger portfolios of pension scheme clients (generally 100+ schemes) there will also be the option of electronic submission of this information.
B. Pension Schemes which are not self-administered.
The facility to pre-register for the Pension Schemes Service is also available to the Scheme Administrators of pension schemes that are not self-administered. They will need to complete the same short form as mentioned above for self-administered pension schemes. To obtain this form they should contact their practitioner or HMRC on 0115 974 1666.
C. All pension schemes
- The details required for pre-registration need to reach HMRC by 6 January 2006 to be included in the cutover of records to our new IT system.
- Towards the end of February a Scheme Administrator identification number (ID) and an activation token will be issued by post to pre-registered Scheme Administrators (separately for security reasons). These are needed to complete registration for the online Pension Schemes Service. We will tell you more about this in a later newsletter.
- Scheme Administrators who have not pre-registered will have to wait until 6 April 2006, and then follow the process that will apply on or after 6 April 2006. This means that it will be up to 5 days before they can view pension scheme records or carry out online transactions
- On completion of pre-registration for the online Pension Schemes Service, Scheme Administrators and Practitioners will be able to view and amend their records as well as submit statutory forms online. In addition, for those schemes and providers using their own software that meets with HMRC standards, there will be the facility for direct transmission of data to HMRC from internal systems.
a) Registered Pensions Scheme Manual
The Registered Pension Schemes Manual, when completed, will contain all the information you require about the new tax rules, how to register and administer a scheme, make returns, update scheme records, answer technical queries from your clients, understand the tax consequences of investments and so on. We are publishing the chapters in tranches, the details of which we published last month in Newsletter No.1.
The manual is written for the Internet which is the way that HMRC publish manuals. It is written in a professional style in the format that is best suited to the media delivering it, which is an HTML format. You can navigate through this type of format far more easily than a PDF document, through a series of links and it is easy to access (no waiting for a huge document to come through your phone line). The guidance is structured to meet the different needs of all of our customers (including a very large number who will only access it occasionally). We feel that this is by far the best format for publication of the manual on the Internet.
We are however aware that there is a demand for a printable version of the guidance to help people familiarise themselves with the new regime. We are looking at the feasibility of producing a version that will be more easily printable to enable people to use this for training purposes. Any such version would be for initial training purposes only and it is unlikely that it would be regularly updated.
If you want to save the manual onto your own system and adapt it to your
requirements you can download a zipped file
containing the Manual which will allow you to use it off-line. Anyone doing
this will have to monitor our Internet site to check for changes to the
guidance. You will require the software tool Winzip to unzip the file and
use the Manual on your system.
Difficulties with the publishing process and preparation of new regulations
have meant that we have had to change our publication schedule and we will
not be able to issue chapters in the order originally planned. Chapters
on Registration and Pension Age will be on the Internet at the end of July
and all other chapters will be available in September.
A further tranche of regulations has recently been published on the HMRC website (on 20 July). Regulations that have been published to date can be found at Pensions Tax Simplification – Draft Regs. Following an announcement in the Budget Note issued on the 16 March 2005, we have recently been carrying out a limited consultation exercise to discuss the way in which pension commencement lump sums are calculated from schemes which provide scheme pensions from money purchase arrangements. We expect that an announcement on the outcome of this exercise, along with details of further regulations that are needed to give full effect to the new regime, will be published shortly. We are working hard to get the regulations ready and expect the vast majority of these to be published by the end of the summer.
If you have any questions about Pensions Tax Simplification please contact our helpline number on 0115 974 1600 or 0115 974 1777 (9.00 to 17.00 Monday to Friday)
If you have any comments about our Newsletter then please contact:
Paul Cottis
Audit & Pension Schemes Services
Yorke House
Castle Meadow Road
Nottingham
NG2 1BG
0115 974 1692
