Guidance

Pension schemes newsletter 136 ― January 2022

Updated 31 March 2022

1. Relief at source

1.1 Notification of residency status report for 2022 to 2023

You can now download your January 2022 notification of residency status report from the Secure Data Exchange Service (SDES). Your report will be based on data from your 2020 to 2021 annual return of information.

As we explained in Pension schemes newsletter 135 you have 6 days (144 hours starting from when we made the report available to you) to download your file. You should have received an email when your file was available for you to download.

If you’re expecting an email from us but do not think you’ve received one, check your junk folder in your email account.

Email: support.SDES@hmrc.gov.uk if you:

• cannot open your report because the file is corrupt
• do not download your report in time

Email: reliefatsource.administration@hmrc.gov.uk using ‘Relief at source — January 2022 residency report’ in the subject line, if you:

• do not receive your report by the end of January 2022 and you submitted your annual return of information for the previous tax year
• have questions about the data contained within your report

1.2 If you did not receive a notification of residency status report

If you did not receive a residency report in January 2022, you can check your members’ residency status for relief at source. You can check the residency tax status for single or multiple members or default to the UK basic rate for your members.

If you do not have a residency status for a member by the time you claim relief at source on their first contribution in a tax year, you must treat them as having a ‘rest of UK’ residency status. You must not apply a tax rate based on the member’s address.

Once you’ve used a residency status to claim relief at source for a member, you must use this for the whole of the tax year.

2. Normal minimum pension age (NMPA)

We’re now able to provide further information on the increase in the normal minimum pension age from 6 April 2028 and the new 2028 protection framework. This information is provisional and subject to the legislation in Finance Bill (No.2) 2021 to 2022, obtaining Royal Assent and guidance being published in the Pensions Tax Manual.

The bill introduces an increase in the NMPA from age 55 to 57 from 6 April 2028. Members of certain uniformed service pension schemes (for example, firefighters, police and armed forces) are exempt from the increase in NMPA, and there are no changes for those who already have an existing protected pension age from age 55 or below.

The bill also introduces a new protection framework for members of registered pension schemes, giving them such a right to take their entitlement to benefits under those schemes before age 57, if on or before 4 November 2021 they either:

• had an unqualified right
• were in the process of a substantive transfer to a scheme

To benefit from new 2028 protection, the rules of the pension scheme must have included (on 11 February 2021) an unqualified right to take the entitlement to scheme benefits before age 57. For members with a 2028 protection there are different restrictions on retaining a protected pension age following a block or individual transfer.

2.1 Unqualified right

A member has an unqualified right to take benefits if they do not need the consent of anyone before they can take their benefits.

If the scheme documentation states that the consent of the trustees or employer is required to take benefits, the member does not have an unqualified right to take benefits. It does not matter that the trustees have always operated their discretion to allow for payment of early benefits, there is no unqualified right.

Furthermore, where the scheme rules refer to the NMPA or its underlying legislation (for example, permitting benefits to be taken from the lowest age consistent with the Finance Act 2004), it would not be an unqualified right to a protected pension age. It would merely provide for payment from the youngest age prescribed from time-to-time.

There may be more nuanced cases where professional advice should be sought about the effect of a particular drafting and trustees and scheme administrators (with any professional advice) will be best placed to determine what rights their scheme rules provide .

Further examples of an unqualified right can be found in existing guidance in the Pensions Tax Manual (PTM).

2.2 Joining a 2028 protected scheme

To benefit from the 2028 protection framework, an individual should have joined, or have made a substantive request to join, a scheme offering an unqualified right to a protected pension age of less than 57, on or before 4 November 2021.

Individuals who join or transfer to such a scheme on or after 4 November 2021, will not satisfy the entitlement condition in the legislation, so cannot benefit from a 2028 protection.

The provisions in the 2028 protected pension age do not apply to other previous protection regimes for which the existing provisions in schedule 36, Finance Act 2004 will continue to apply. This includes members with pre A-day protections or protections following the previous increase in NMPA in 2010.

A substantive transfer request is where a member has made a request to the scheme administrator or scheme manager of their pension scheme on which they are required to take action in relation to the transfer. This means an instruction from the member to transfer £X or X% of their pension funds to a named pension scheme. A casual enquiry is not a substantive transfer request.

Where a substantive transfer to ‘Scheme A’ is requested on or before 4 November 2021, but is not completed and instead the funds are sent to ‘Scheme B’, that transfer is not a pre-4 November 2021 requested transfer. This is because the funds have not been sent to the scheme included in the transfer request made on or before 4 November 2021.

2.3 Block and individual transfers

A scheme member will not lose their 2028 protected pension age as a result of a block transfer where all of the following apply:

• it’s a transfer of the pension rights relating to the member and at least one other pension scheme member
• the transfer is made as a single transaction
• the transfer represents all the pension rights under the scheme for all the members transferring as part of that single transaction

Following a block transfer, the member should retain the protected pension age they had in the previous scheme and successive block transfers can be made without affecting the member’s protection.

Under the 2028 protection framework the following also applies to block transfer:

• it does not matter if the member has already been a member of the pension scheme to which the block transfer is made before the date of the transfer ― the 12-month ‘permitted membership period’ is not a requirement
• there is no requirement for all the members rights to come into payment at the same time
• there is no restriction on the members re-employment after taking benefits

For individual transfers, the member can transfer their pension rights at arrangement level and retain their 2028 protected pension age in the receiving scheme. There is no requirement for the member to have a protected pension age already in the receiving scheme.

However, the 2028 protected pension age would not apply to other sums or assets already held in the receiving scheme, or that are subsequently put into the scheme either by pension contribution or transfer. The aim is to protect the transferred pension rights, not enhance them, so the protected transferred rights will require ring-fencing in the receiving scheme.

The 2028 protected pension age should also be retained by the member on subsequent relevant transfers. However, the protected pension age would not apply to other sums or assets held already in the receiving scheme.

The 2028 protection provisions will also operate in the same way as it does now, where the transfer is from a registered pension scheme to a qualifying recognised overseas pension scheme (QROPS). So, if the individual has a 2028 protected pension age and there is a block or individual transfer, then an individual would take their protection with them to the QROPS.

However, if there was not a protected pension age previously, then payments before age 57 after 5 April 2028 will result in an unauthorised payment charge, but only if they are in scope of the member payment charges.

2.4 Transitional arrangements

There may be transitional issues that arise for some members. For example, where the member does not have a protected pension age and they have reached age 55, but not age 57 by 6 April 2028. Establishing a clear position on the transitional issues is therefore important so that schemes have sufficient detail on these well before the increase to age 57 comes into effect in 2028.

Work on the transitional arrangements is underway and is likely to require legislative change through regulations to make sure the policy will work as intended. We’ll provide further updates in future pension schemes newsletters.

2.5 Information regulations

There are no plans to introduce further reporting regulations for schemes.

3. Extension to some of the temporary changes to relief at source processes

In Pension schemes newsletter 134, we told you that we were extending some of the temporary changes to relief at source processes until 31 March 2022. These were to help scheme administrators during the coronavirus (COVID-19) pandemic.

We’ve reviewed these changes and are extending the easements for obtaining wet signatures on the APSS105, APSS106, APSS107 and APSS590 declarations until 31 March 2024. All other temporary changes for relief at source will end on 31 March 2022.

This means that until 31 March 2024, HMRC will accept scanned relief at source forms:

• emailed by the authorised signatory ― in this circumstance we will accept the form without a signature
• signed and emailed by someone else providing we also receive a separate email directly from the authorised signatory authorising them to submit the form

For the APSS105, APSS106 and APSS107, email: pensionschemes.reliefatsource@hmrc.gov.uk.

For the APSS590 declarations, email: reliefatsource.administration@hmrc.gov.uk.

4. Maintaining qualifying recognised overseas pension schemes (QROPS) status

We’ve been informed that a pension scheme notified to HMRC as a recognised overseas pension scheme (ROPS) has since established a section that claims to offer defined benefits rights, with the intention of receiving transfers of UK defined benefits pension rights.

We want to remind QROPS scheme managers that to maintain QROPS status, your pension scheme must continue to meet the conditions to be a ROPS at all times. You can find more information about the conditions to be a ROPS in Overseas pensions: tell HMRC you’re a qualified recognised overseas pension scheme.

One of the conditions is that if the scheme is an occupational pension scheme and there’s a body in the country where the scheme is based that regulates occupational pension schemes, then the scheme must be regulated by that regulatory body. We’ll consider that your QROPS maintains its status only if the regulatory body fully regulates your scheme.

Any changes to your pension scheme can affect its QROPS status and you must report those changes to HMRC. Form APSS251A is available for QROPS scheme managers to make these reports.

We also want to remind scheme administrators considering a transfer of pension savings to overseas schemes that before you make the transfer, you and the member requesting the transfer must check if the scheme continues to meet the conditions to be a ROPS, which includes complying with local regulatory requirements.

5. Pension flexibility statistics

HMRC can now give more information on the number of tax repayment claim forms processed for pension flexibility payments.

From 1 October 2021 to 31 December 2021 we processed:

• P55 — 8,360 forms
• P53Z — 3,693 forms
• P50Z — 1,526 forms

Total value repaid: £42,188,885

The tax repayment figures for the period 1 January 2022 to 31 March 2022 will be published in Pensions schemes newsletter ― April 2022.

6. Managing Pension Schemes service

6.1 Pension scheme migration

We can now provide more information on when the feature for migrating pension schemes will be made available on the Managing Pension Schemes service. We’re currently planning to release this in early April 2022. We’ll provide a further update on this in a future newsletter to confirm the date.

When we release this, we’ll also introduce additional features to the Managing Pension Schemes service to help pension scheme administrators and practitioners manage their pension schemes.

6.2 Bulk reporting for Accounting for Tax (AFT) returns

From early April 2022, when compiling an Accounting for Tax return on the Managing Pension Schemes service, you’ll be able to bulk import data from a spreadsheet, directly on to the service to populate the return.

When released, this function will be available for importing the details of annual allowance charges and lifetime allowance charges at a minimum.

You’ll need to upload a different spreadsheet for each charge. If you upload more than one spreadsheet for the same charge, the original upload will be overwritten.

All spreadsheets will need to be uploaded as CSV files. The CSV files will be available on the service. However, if you’d like to see a version of this in advance to prepare your systems, email: pensions.administration@hmrc.gov.uk using ‘AFT CSV file’ in the subject line.

We’ll provide further guidance on how this will work in a future newsletter.

6.3 Financial information

In October 2020, we added a feature for details of charges to be viewed on a scheme or scheme administrator record. You can find further information on what was included in this release in Pension schemes newsletter ― October 2020.

From early April 2022, we’ll update this feature to include information about payments made, where they’ve been allocated and your overall account balance. Where there is an overall credit balance displayed on the record, you’ll have the option of requesting a refund through the service.

We’ll provide further guidance on this feature in a future newsletter.

6.4 Viewing your list of pension schemes to migrate

Scheme administrators must be enrolled on the Managing Pension Schemes service to be able to migrate their pension schemes.

In November 2021, we released a feature on the service for pension scheme administrators to view a ‘read only’ list of their pension schemes that were registered on the Pension Schemes Online service. Only schemes with a status of ‘open’ will be included in the list.

If you’ve completed the process of setting up your ‘Master’ and ‘Ancillary’ scheme administrator IDs, you’ll be able to view all open pension schemes under all of these IDs on the Managing Pension Schemes service.

Scheme administrators will be able to view any retirement annuity contracts and deferred annuity contracts on a separate list to other pension schemes they’re an administrator for.

You can find further information on this in Managing Pension Schemes newsletter ― November 2021.

You can find guidance on how to notify us, if you:

• can see schemes that are inactive and should be wound up
• can see schemes that you do not recognise
• cannot see listed all the schemes you have registered on the Pension Schemes Online service

If you’ve already enrolled but have not yet viewed your list of pension schemes, we’d encourage you to do this as soon as possible and take any action necessary to prepare for migration.

6.5 Preparing to migrate pension schemes

To migrate your pension schemes on to the Managing Pension Schemes service, you’ll need to provide some information for each scheme. Where possible, details of the scheme that we hold on the Pension Schemes Online service will be pre-populated, with the option to update the details where applicable. You’ll also be required to provide additional information to complete the process. You can find full details of the information required in Appendix A.

All details entered must reflect the current position of the pension scheme.

We’d encourage you to start collating the information for your pension schemes as soon as possible, in preparation for the planned release of the scheme migration feature in early April 2022.

If you have any questions about providing establisher details for a registered pension scheme for migration, email: migration.mps@hmrc.gov.uk with the following information:

• the pension scheme name
• your pension scheme tax reference
• your scheme administrator ID
• details of the pension scheme establisher query

For retirement annuity contracts and deferred annuity contracts, no further information will be requested. You’ll only need to complete the declarations on the Managing Pension Schemes service to migrate these pension schemes. If you have multiple retirement annuity contracts or deferred annuity contracts, you’ll be able to migrate these altogether, by just completing one set of declarations for all your retirement annuity contracts or deferred annuity contracts.

Once you’ve migrated the pension scheme, it’ll still exist on the Pension Schemes Online service.

6.6 Filing Accounting for Tax (AFT) returns

As currently planned, from mid-March 2022 you will no longer be able to compile and submit an Accounting for Tax return for any quarter from 1 April 2020 on the Pension Schemes Online service.

This means that if you need to submit a return for the quarter 1 January 2022 to 31 March 2022, you must migrate your pension scheme in time to compile and submit the return by the filing deadline of 15 May 2022. If you think this will cause issues for you, email: migration.mps@hmrc.gov.uk using ’31 March 2022 AFT’ in the subject line. We’ll then contact you to discuss this further.

Find information on how to submit an Accounting for Tax return on the Managing Pension Schemes service.

If you’ve compiled, but not yet submitted, a new return on the Pension Schemes Online service for any quarter from 1 April 2020, you will not be able to successfully submit this on that service from mid-March. If you try to do this, you’ll receive an error message explaining that you’ll need to re-compile and submit the return on the Managing Pension Schemes service.

If you’ve already submitted a return for a quarter between 1 April 2020 and 31 December 2021 on the Pension Schemes Online service, you’ll still be able to view and amend these on the service.

We’ll provide further guidance on this in the future.

6.7 Filing Accounting for Tax (AFT) returns using third party software

From mid-March 2022, you will no longer be able to successfully submit any Accounting for Tax returns for any period using third party software. You’ll need to compile and submit the return directly on the relevant service as previously explained.

If you try to submit a return using third party software, you’ll receive an error message signposting you to guidance on how to submit the return.

6.8 Pension scheme practitioners

If you’re a pension scheme practitioner who would normally file Accounting for Tax returns on behalf of a scheme administrator, before you can do this on the Managing Pension Schemes service, you must make sure you’ve enrolled.

Once the pension scheme administrator has successfully migrated the pension scheme, as long as you’re enrolled on the service, you’ll automatically be authorised to the pension scheme.

If you’ve not already enrolled, we’d encourage you to do this as soon as possible.

We’ll provide further information on how pension scheme migration will affect pension scheme practitioners in a future newsletter.

6.9 How you can help us

We’re still looking for people to help us improve the Managing Pension Schemes service and test some of the upcoming features.

You can take part in user research and give us feedback by joining the Managing Pension Schemes user panel. As a member of the panel, we’ll only contact you about the Managing Pension Schemes service.

This is your chance to give feedback and help inform the future design and development of the service.

You can also email feedback to pensions.businessdelivery@hmrc.gov.uk using ‘Managing Pension Schemes service ― feedback’ in the subject line.

7. Scheme Pays reporting

As announced in Pension Schemes Newsletter 134, the government introduced legislation in Finance Bill 2021 to 2022 to extend the Scheme Pays facility in relation to annual allowance charges.

If there’s been a retrospective change to the individual’s pension input amount, the Finance Bill extends the deadlines when:

• an individual must give notice to their pension scheme administrator that they want to use Scheme Pays to pay an amount of their annual allowance charge
• the pension scheme administrator must report and pay that annual allowance charge, through the Accounting for Tax Return

These extended deadlines will apply where an individual asks their pension scheme administrator to settle their annual allowance charge of £2,000 or more from a previous tax year, by reducing their future benefits.

Further Scheme Pays deadlines, provided for in regulations, also require extending so that the Scheme Pays facility will work as intended where there has been a retrospective change to the individual’s pension input amount. We expect the regulations to take effect 6 April 2022 and aim to share draft regulations for a short technical consultation in early 2022. The Pensions Tax Manual will be updated in due course.