The Finance Bill is expected to be published on 29
March 2012.
Commutation
of small personal pension funds
The draft regulations as they stand will enable
individuals to access small levels (£2,000 or less) of savings held in personal
pension schemes. Such payments will be paid 25% tax free with the remaining
part of the payment being treated and taxed as pension income.
The measure will have effect for lump sum payments
made on or after 6 April 2012 and will be available for those aged 60 or over.
The payment must also extinguish the member’s entitlement to benefits under the
arrangement.
In contrast to occupational pension schemes an
individual will only be able to have two such lump sum payments in their
lifetime. This provision is intended to prevent individuals from splitting a
large fund into numerous smaller funds so that they can take advantage of this
relaxation.
Transfers to
QROPS
HMRC notes that ‘The Government expects that
individuals will use the QROPS regime to transfer their pension savings where
they leave, or intend to leave, the UK permanently so that they can continue to
save to provide an income when they retire.’
Revisions to current legislation are to be
introduced to reinforce this message but do not go so far as stating this as a
condition for a transfer to a QROPS.
Changes include amendments to the conditions
applicable for a scheme to qualify as a Qualifying Recognised Overseas Pension
Scheme (QROPS), and the reporting requirements around transfers to these
arrangements.
Conditions to be met by a QROPS
The conditions that a pension scheme must meet to
be a QROPS will be revised as follows:
- The tax conditions will be amended to remove
the loophole which allows a scheme to be more attractive to non-residents
than residents from a tax perspective.
- New Zealand schemes will have to meet the
condition that 70% of funds transferred to pension schemes are used to
provide retirement income. An exemption from this will apply to a ‘KiwiSaver’
scheme.
- The QROPS manager will have to report on all
payments out of the scheme for a period of 10 years from the date of
transfer. This report should be made within 60 days of the payment being
made.
Event Report Updates
In addition, there will be
increased reporting requirements for schemes that are making transfer payments
to a QROPS. The information required includes:
- evidence that the member understands the
potential for unauthorised charges where the receiving scheme is not a
QROPS;
- various details about the member including
their principal residential address;
- details of the assets transferred; and
- details about the receiving scheme along with
a contact name and address.
An event report containing
the information must be completed within 30 days of the transfer taking place. To
ensure the scheme is able to provide this information the legislation requires
the scheme administrator to send the member notification of what is required
within 30 days of the initial transfer request, the member must then provide
this information within two months of the initial transfer request
Additional Information Provision
In addition HMRC will be able to demand additional
information from the QROPS including amongst other items; bank details of the
individual concerned, evidence that the scheme continues to meet the conditions
for a QROPS and any other evidence relating to the transfer.
The amendments apply to payments made after 6 April
2012.
