Finance Bill published

The full Finance (No.2) Bill 2016-17 was published on 20 March, confirming many of the changes to pensions tax law and related matters that were announced in the Autumn Statement and subsequently consulted on in December (see Pensions Bulletin 2016/49), along with the changes announced in the Spring Budget (see Pensions Bulletin 2017/11).  However, there have been some adjustments to the clauses that were then published.

For further details see our News Alert.

Foreign pension schemes no longer subject to the 70% income rule

Regulations have been laid before Parliament removing the 70% rule from the conditions that a pension scheme has to meet to be an overseas pension scheme or a recognised overseas pension scheme (ROPS).  The rule required 70% of funds that had received UK tax relief, either in connection with contributions or as a result of a tax-free transfer, to be designated to provide the individual with an income for life.

The regulations also:

• Require an overseas provider of a non-occupational pension scheme to be regulated by a body in the country where the scheme is established if there is no body which regulates such schemes and the scheme is not established within the EEA
• Now include overseas public service pension schemes within the meaning of an “overseas pension scheme”
• Require a ROPS not established within the EEA to be established in a country where there is a tax information exchange agreement providing for the exchange of information between fiscal authorities in the UK and the overseas country or territory
• Provide that a ROPS established in Guernsey cannot accept transfers in respect of non-residents of Guernsey; and
• Allow overseas schemes to pay benefits earlier than normal minimum pension age, but only where the payments would be authorised if made by a registered pension scheme

The Pension Schemes (Categories of Country and Requirements for Overseas Pension Schemes and Recognised Overseas Pension Schemes) (Amendments) Regulations 2017 (SI 2017/398) come into force on 6 April 2017.

Comment

As can be seen the general effect of these regulations is to tighten, not loosen the conditions governing overseas pension schemes, but within this, the removal of the 70% rule is welcome.  Following the introduction of “Freedom and Choice” for UK pension schemes in 2015 it has become outdated.

HMRC explains Budget pension changes in Newsletter 85

Much of HMRC’s latest pension schemes newsletter is taken up explaining the introduction of the overseas transfer charge announced in the Spring Budget (see Pensions Bulletin 2017/11) and related issues.  There is nothing new in this latest guidance other than an appendix containing wording that could be used by registered pension schemes to communicate to members thinking of transferring to a QROPS and another appendix summarising details that may be of assistance to overseas schemes.

Other topics covered include the following:

• Reporting of non-taxable death benefits through real time information – which states that although HMRC has completed its investigation into why P6 tax coding notices were issued in error, the solution they are working on will not be ready for the start of the 2017/18 reporting year and so scheme administrators should continue to follow the guidance in Newsletter 78
• Relief at source – covering annual returns of individual information for the 2015/16 tax year including the change of filing deadline for such returns and consequences for those who have now missed the deadline
• Scottish rate of income tax – covering a number of administrative issues, particularly in relation to an individual’s taxpayer status (Scottish or rest of UK)
• Lifetime allowance (1) – reminding readers that the deadline for individuals to register for Individual Protection 2014 is midnight on 5 April 2017
• Lifetime allowance (2) – in an extension to what already has been said for 2016/17 Event Reports to cover 2017/18 Event Reports too, that (because HMRC has not completed system work) the reporting that would normally be included in the report of members who have relied on Individual Protection 2014 (online registered or a 2016 protection) will need to be sent in a supplementary email (but we note that these reports are not due for submission until January 2018 and 2019 respectively unless a scheme wind-up accelerates the deadline)
• The length of time taken by HMRC to register new pension schemes – there has been concern that HMRC is taking too long to vet new scheme registrations; this latest update will not assuage such concerns

Comment

Usefully, in relation to Individual Protection 2014, HMRC acknowledges that, although the deadline for applications closes at midnight on 5 April 2017, individuals will still be able to log on and amend an existing application after this date.

Pension Advice Allowance regulations settled

Following a short period of consultation, regulations have been settled that enable payments taken from a member’s pension fund for the purpose of retirement financial advice to be regarded as authorised under the Finance Act 2004.

The regulations are very similar to the draft regulations issued in February (see Pensions Bulletin 2017/06), but have been tidied up so that:

• It is now clear that the payment can only be made from a money purchase or a hybrid arrangement
• The information given by the person seeking to utilise the allowance now extends to declaring that the advice to be taken is regulated (though not that it is retirement-related); and
• It is no longer possible for a beneficiary to directly utilise the allowance

The Registered Pension Schemes (Authorised Payments) (Amendment) Regulations 2017 (SI 2017/397) come into force on 6 April 2017.

Comment

The draft regulations were most definitely in need of some refinement, so it is pleasing to see that the most obvious shortcomings have been addressed.  We look forward to seeing HMRC guidance to explain some of the other unclear areas.

Auto-enrolment qualifying earnings parameters settled

The Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2017 (SI 2017/394) has now completed its passage through Parliament.

The Order provides that the lower and upper limits for qualifying earnings, principally used to determine the minimum contributions payable to a scheme that qualifies for auto-enrolment purposes, rise to £5,876pa and £45,000pa respectively with effect from 6 April 2017.  They therefore retain their linkage with the national insurance lower and upper earnings limits.

The level of earnings at which the employer auto-enrolment duty is triggered remains at £10,000 pa.

This Pensions Bulletin does not constitute advice, nor should it be taken as an authoritative statement of the law.  For further help, please contact David Everett at our London office or the partner who normally advises you.