Shares Valuation Fiscal Forum: Self-administered Pensions Schemes
SELF-ADMINISTERED PENSION SCHEMES
Reply to WJB Chiltern
Audit and Pension Schemes Services (formerly the Pension Schemes Office) consult Shares Valuation when they need to consider a transaction by the trustees of a self-administered pension scheme which involves unquoted shares. These valuation requests are dealt with by our training team, since the approach to them differs from that required for other fiscal purposes.
The proposed transaction in the case to which W J B Chiltern refer did not take place, not because of the inability to agree a value but simply because Audit and Pension Schemes Services would not permit the transfer from an approved to an unapproved scheme.
As David Bowes says, the basis of valuation in pension scheme cases does differ from the normal basis of fiscal valuation since the pension scheme regulations refer only to `market value'. In discussions with pension scheme colleagues, the consensus was that we should have regard to commercial reality. David Bowes describes one particular transaction involving pension scheme trustees - but there are other kinds of transactions which we meet more frequently, such as a sale by a shareholder to pension scheme trustees or a sale by the latter, either to a shareholder or to the company. In considering market value in relation to such transactions, we think we should reflect reality. For instance, if a controlling shareholder transfers a block of shares to a pension scheme fund, of which he is the principal beneficiary, we value the shares as part of his controlling shareholding. From one point of view, nothing has changed - it is just that some of the shares are now in a different compartment.
Many of the cases with which the Training Team deals are of this kind. We ascertain not only who are the company's shareholders but also who are the beneficiaries of the pension fund. In the case David Bowes cites, investigations were at an early stage since we awaited advice on whether the proposed transaction was permissible. However, it is noted that the 40% shareholder was the settler of a discretionary trust which had a 23% shareholding and it is also assumed that he was principal beneficiary of the pension scheme fund, with its 12% holding.
If the pension scheme were for the benefit of all employees, not just shareholders, or if no individual or his immediate family had control in any capacity, we would value the shares in question as (part of) a minority holding.
The answers to David Bowes' bulleted points are:-
- Where (effectively) there is little or no change in beneficial ownership as a result of a transaction, it seems reasonable to value shares in each compartment as part of the aggregate. You refer to a possible sale by the trustees. Such a sale to unconnected shareholders or to outsiders would seem to be an unlikely eventuality - an eventual sale as part of a larger sale of other shares owned personally by the scheme's beneficiaries would seem much more likely.
- As above. Our approach has been developed following discussions with Audit and Pension Schemes Services. It has been accepted by trustees and their representatives and applied without difficulty in the great majority of cases our training team has considered.
- In the case you cite, the transaction was not, in the event, permissible. However, this is a reasonable concern for which we will keep a watch in permitted transactions.
- Audit and Pension Schemes Services does have the ultimate sanction of withdrawing approval from a pension scheme. However, the great majority of valuations we have been asked to undertake have reached a cordial and mutually satisfactory conclusion.
Given the lack of statutory authority, whilst we have described our approach, we would be prepared to consider alternative approaches, if cogent contrary arguments were adduced, or if the facts of a particular case demanded different treatment.
Bob Cartwright
SV Training
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