Pensions Tax Simplification Newsletter No 26

30 March 2007

Contents

Introduction

Welcome to the twenty sixth edition of the Newsletter.

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

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Budget 2007

The Budget on 21 March 2007, contained several announcements on changes to the pensions' tax regime to ensure that the pensions tax rules continue to meet their original intention and that pensions tax relief is used for saving for a retirement income:

  • changes to the rules on Alternatively Secured Pensions (ASP) to ensure that pension saving is used to provide an income in retirement and is not used to create tax relieved inheritance;
  • a measure to remove an individual's entitlement to tax relief on any pension contributions they pay that are used for personal term assurance policies; and
  • a package of technical improvements to ease the administrative rules including changes to the taxation of non-cash benefits provided by employers to their retired former employees

Further details on these measures can be found in:

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Regulations Update

Laid Regulations

The following regulations and orders which relate to pension schemes have recently been laid

This instrument consequentially amends schedule 28 of Part 4 of the Finance Act 2004 and the Pensions Schemes (Application of UK Provisions to Relevant Non-UK Schemes) Regulations 2006 (S.I. 2006/207) so that references to 'marrying' 'marriage' and 'spouse or ex-spouse' are updated to include civil partnerships and civil partners or former civil partners

This Order sets the standard lifetime allowance and annual allowance for the purposes of the tax relief in relation to pensions for 2007/08 to 2010/11

These Regulations make a small amendment to some existing Regulations, which provide for certain large registered pension schemes to be treated as if they were a number of separate registered pension schemes.

These Regulations prescribe the rate by which a scheme pension can be reduced when a scheme member becomes entitled to receive their State pension where the employment of the member has been partly contracted-out.

This Order amends pension regulations which are the responsibility of the Department for Work and Pensions. It deals with the calculation of a pension commencement lump sum paid from protected (contracted-out) rights, where a member is entitled to a scheme pension paid from a money purchase scheme, and brings the calculation into line with that of a pension commencement lump sum paid from non-protected rights. The changes are being made as a consequence of amendments made by the Finance Act 2006 to the lump sum provisions in the Finance Act 2004.

These Regulations make a small amendment to The Registered Pension Schemes (Block Transfers) (Permitted Membership Period) Regulations 2006, which specify as twelve months the maximum period during which an individual can have been a member of a registered pension scheme in order for a transfer into that scheme to be a 'block transfer'.

Draft Regulation

On 12 December 2006, we announced that the Government proposed to lay a Statutory Instrument to deal with the difficulty faced by those schemes whose rules contain a condition that no alteration to the rules may be made unless 'approved' by HM Revenue & Customs. These will insert new provisions into the regulations dealing with modification of the rules of existing schemes, providing an over-ride to any provision in scheme rules that makes alteration of those rules subject to HMRC approval. The draft regulation can be accessed from the link below. These draft regulations apply to former approved schemes, including both occupational schemes and personal pension schemes.

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FSA regulation of SIPPS

It is recognised that Self-invested Personal Pensions (SIPPs) make up a growing sector of the post A-day personal pensions market. SIPPs, of course, give individuals a degree of control over their pension investments. This is in accordance with the policy underlying tax simplification, which is to allow pension savers greater choice and flexibility.

From 6 April 2007, the Financial Services Authority (FSA) will regulate the operation of personal pension schemes in the UK. Most firms in the pensions industry are already subject to some form of FSA regulation, and it will be straightforward for them to obtain the necessary authorisation to operate personal pension schemes.

Firms operating SIPPs have not, in general, been regulated by the FSA. The change will ensure greater consumer protection. In addition a number of new providers are expected to enter the market from April, increasing choice and innovation. However, a small number of current SIPP providers may choose not to continue to operate these schemes. Their members would need to switch operators or set up replacement schemes. This could have tax consequences for scheme members, particularly where their existing SIPP has loans which are subject to the pre A-Day borrowing limits.

HMRC and the Treasury will monitor the market from April and work with industry representatives to identify any problems that do emerge.

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New establishment rules for Personal Pensions

We issued on 5 March 2007 a reminder about the forthcoming changes to the registration rules for pension schemes that are not occupational pension schemes and how these changes will apply to registration applications. This information will give guidance and specifications on making annual information returns for Registered Pension Schemes operating relief at source.

Changes to the rules on who can establish a registered pension scheme that is not an occupational pension scheme

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Employers' contributions to registered pension schemes

The guidance on the deduction in computing trading profits for employers' contributions to pension schemes has now been finalised, and can be found in the HMRC Business Income Manual (at BIM46000 to BIM46198).

Any queries about specific cases should be addressed to the Tax Office dealing with the CT/IT affairs of the employer.

We would like to thank all those who have provided feedback on the previously published draft guidance.

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Scheme Administrator Helpsheet

We have published on the website a short helpsheet with key facts for Scheme Administrators.

The purpose of the helpsheet is to raise awareness of the role and responsibilities of the Scheme Administrator. In particular it is aimed at those individuals who are Scheme Administrators, but who are not directly part of the pensions industry. It is important that those who are undertaking this role are aware of what it entails and their obligations to HMRC.

In order to help those who may be affected, we would be grateful if you could either provide a link to this information from your website or incorporate it within any literature you provide to Scheme Administrators.

For those who want more detailed information about the role and responsibilities of the Scheme Administrator, you should direct them to the Scheme Administrator pages in the Registered Pension Schemes Manual.

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Forms Update

There have been a number of announcements and changes relating to forms in the last month:

  • From 16 March 2007, you should use the APSS105, APSS106 and APSS107 forms for Personal Pension Relief at Source claims. Further information is available.
  • An updated version of the APSS200 form (Protection of existing rights) and completion notes for applying for protection against the Lifetime Allowance charge are now available
  • We have published revised versions of the scheme maintenance forms APSS151, APSS152, APSS153, APSS154 and APSS160. These versions of the forms should be used from 21 March 2007.
  • New versions of the scheme registrations forms APSS100 & APSS100A will be published on 2 April 2007. See below for further information about submission dates.
  • A new version of the Event Report APSS300 will be published on 2 April 2007. However, this new version should not be used for any submissions before 6 April 2007.
  • The final versions of the Pension Scheme Returns, APSS301 for occupational schemes and APSS313 for non-occupational schemes were published on 26 March 2007.

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Pension Schemes Online upgrade and the final date for submission of old-style scheme registrations

In April the APSS100 & APSS100A forms for registering a pension scheme will change.

In addition, there will be an upgrade to Pensions Schemes Online taking place shortly to support the changes to existing processes and new processes described in newsletter 24. Pension Schemes Online will therefore not be available from approximately 6.00AM on Wednesday 4 April until approximately 6.00AM on Friday 6 April.

In order to minimise the problems of changing over from the old versions of the APSS100 & APSS100A to the new ones, there will be a brief period when the forms won't be available, either as a paper version to download or for completion using Pension Schemes Online, and there are time limits by which PSS needs to receive the forms in order to process them.

For those using Pension Schemes Online, as the service will not be available from approximately 06.00AM on 4th April, you will not be able to complete any registrations using Pension Schemes Online from then until 6th April, when the new-style form will be available.

If you start registering a pension scheme online before 4 April, you must submit the completed registration to us before the system is closed down for the upgrade, otherwise the information you have entered will be lost and you will have to enter the information again when the system is available.

For old-style 'paper' registrations, PSS guarantee to process these and include them on the online system before the end of the tax year if they are received no later than midday Tuesday 3 April.

If you miss the cut off date for registering a scheme online and you want to submit a paper application so that a pension scheme is registered before the end of the tax year please ensure that the application is clearly marked as being one that should be registered during 2006/07. We will process properly completed applications and the scheme will be registered during 2006/07 - however the online system will not be updated until a later date.

If an application is received on the 4th or 5th April that is not marked in this way we cannot guarantee that it will be registered for 2006/07. And for any properly completed applications received on or after 6 April 2007, we will register the scheme for 2007/08.

If you want to check the position on your application form please contact the PSS Helpline on 0115 974 1600.

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Filing dates for SA970 (Pension Scheme SA Return)

In the Budget, there were changes announced to Self Assessment return filing dates following Lord Carter of Coles' recommendations, which have effect from the return for the 2007/08 tax year onwards.

The deadline for filing a paper return has been brought forward to 31 October, with the deadline for electronic returns remaining at 31 January. Trustees of Registered Pension Schemes do not currently have the option of filing their return online. HMRC is continuing to look at ways of extending its online tax return filing service, but in the meantime, we will allow more time for filing the SA970, using our existing powers in section 118(2) of TMA 1970. Penalty notices will not be issued where a 2007-08 SA970 return is filed by 31 January 2009.

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Pensions Industry Working Group Minutes

The minutes of the last Pensions Industry Working Group meeting held on 7 February 2007 have now been published.

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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 us 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:

Pension Schemes Services (PSS)
Yorke House
Castle Meadow Road
Nottingham
NG2 1BG