HMRC’s
most recent newsletter
covers a number of different areas, including the update of the Registered
Pension Schemes Manual to include the Finance Act 2011 changes, proposed
guidance on trivial commutation and confirmation of two aspects relating to
drawdown pensions.
Registered Pension
Schemes Manual (RPSM)
RPSM
has now been updated to incorporate the changes resulting from the Finance Act
2011.
Links
to the updated RPSM are contained within the newsletter. This includes the
following:
- new
annual allowance rules from 6 April 2011;
- how Lifetime
Allowance enhancement factors, fixed protection, primary protection and
scheme specific lump sum protection will work from 6 April 2012;
- Pension
Commencement Lump Sum changes from 6 April 2011;
- lump
sums on deaths after 5 April 2011;
- changes
to the special lump sum death benefit tax charge;
- new
serious ill health lump sum tax charge; and
- drawdown
pensions (and dependants drawdown pensions) and
- how existing unsecured
pensions will transfer.
Trivial Commutation
Guidance Proposed
HMRC
are intending to produce some easily accessible and understandable guidelines for
members and pension providers on the subject of trivial commutation. HMRC will
be liaising with the pensions industry on the guidance and will be issuing
further details in due course.
Drawdown Pension Tables
Where
an individual is under age 23 and receiving a dependant’s drawdown pension, the
maximum amount that may be paid is calculated by reference to the 5 year UK gilt yield
(the 15 year yield is used for over 23s).
The basis amount is then worked out using HMRC’s drawdown tables.
As
the drawdown tables only provide a basis amount for gilt rates down to 2%, and
the 5
year yield is currently less than 2%, HMRC have confirmed that in
such cases, the administrator should calculate the basis amount using the gilt
yield figure of 2%.
Scheme Administrator
Responsibilities for Flexible Drawdown
If
flexible drawdown is offered by a scheme, the scheme administrator needs to
ensure that they take reasonable steps to satisfy themselves that the
individual wishing to take flexible drawdown meets the minimum income condition
of £20,000 per year from pensions in payment.
HMRC
prescribe that a statutory declaration must be provided by the individual that
they meet the condition. Anything
further in support of this is down to what the scheme administrator considers
appropriate.
If
the scheme administrator is satisfied and they keep an audit trail, having
acted in good faith then HMRC expect that the scheme sanction charge would be
waived, should it later emerge that a false declaration has been made. To try
and avoid members misunderstanding the rules and getting it wrong, HMRC would
expect scheme administrators to ask for details on the source of the income the
member wishes to count towards the £20,000 as a check (as not all scheme
pensions and lifetime annuities count).
If the declaration relies on any non-UK pension income, scheme
administrators should make enquiries as to the characteristics of the pension
and the scheme.
