Guidance

Pension schemes newsletter 71 - August 2015

Published 13 August 2015

1. Qualifying recognised overseas pension schemes (QROPS) stakeholder forum

On 21 July 2015 we held a forum with stakeholders to discuss operational issues relating to QROPS. The forum provided us with an opportunity to meet with some pensions industry stakeholders and representative bodies on recent changes to the pension tax rules including:

• the introduction of the Pension age test
• revisions to the published list of Recognised Overseas Pension Schemes (ROPS) notifications
• due diligence

We received lots of feedback about the recent changes. As a result we have provided a more detailed explanation of the ROPS notifications list below.

We’re considering organising similar forums in the future. If you have any questions or would like to be included in these, please contact your Customer Liaison Manager or email pensions.businessdelivery@hmrc.gsi.gov.uk.

2. ROPS notification list

The List of Recognised Overseas Pension Schemes notifications is usually published twice a month. In April 2015 we changed the name of the list to more accurately reflect its purpose.

Purpose of the list

There is a difference between a ROPS and a QROPS.

A pension scheme is a ROPS if it meets the requirements set out in legislation (the ROPS requirements). This is a factual test.

To be a QROPS the:

i) scheme must meet the ROPS requirements

ii) scheme manager must notify HM Revenue and Customs (HMRC) that the scheme meets the ROPS requirements and undertake to provide information (to HMRC, other pension schemes and individuals) and to notify HMRC if the scheme ever ceases to be a ROPS

The published list shows that the scheme manager has notified HMRC, wishes to appear on the list and has undertaken to provide information (point ii), but this is all it shows. It does not show that the scheme meets the ROPS requirements (point i).

A transfer from a registered pension scheme to a QROPS can be made tax-free but care must be taken to check that the scheme is a QROPS.

It is the responsibility of the individual and scheme administrator making the overseas transfer to check that the receiving scheme meets the requirements to be a QROPS. UK tax charges will arise if it does not – usually at 55% on the individual and 15% on the scheme administrator.

Checking the published list the day before the transfer will confirm whether the scheme has notified HMRC. It will not confirm that the scheme meets the ROPS requirements. Checks to confirm whether a pension scheme meets the ROPS requirements should be carried out as part of an individual’s and scheme administrator’s due diligence when making a transfer.

You can find more guidance and information in the ‘International’ section of the Pensions Tax Manual.

3. Annual allowance

a. Annual allowance charges for tax year 2014 to 2015

From 6 April 2014 the annual allowance for tax relief on pension savings in a registered pension scheme was reduced to £40,000. As scheme administrators, you will soon be issuing annual allowance pension statements for tax year 2014 to 2015 to all scheme members contributing more than £40,000 to your pension scheme. The issue of these statements is a legislative requirement of Finance Act 2011.

An annual allowance charge will be due where a member exceeds the annual allowance across all pension schemes and does not have sufficient unused annual allowance to carry forward from previous tax years. Further information on carry forward can be found at Pension savings annual allowance calculators - introduction.

Please remind your members that it is really important that those who have exceeded the annual allowance for 2014 to 2015 declare this on their Self Assessment tax return (the deadline for submitting this is 31 January 2016). They’ll also have to pay a tax charge. Further information on paying tax charges can be found at Tax on your private pension contributions.

Your members can use our online tools and calculators to help check whether they need to declare and pay an annual allowance tax charge, even if they haven’t received a pension statement. These can be found at Pension savings annual allowance calculator - introduction

b. Tapered annual allowance

With the introduction of the tapered annual allowance from 6 April 2016 as well as the transitional rules, the existing requirement for scheme administrators to send an annual allowance pension statement to anyone whose pension savings exceed the annual allowance in that scheme may no longer be appropriate.

We are considering how the current rules could be adapted to help individuals who are affected by the tapered annual allowance work out any annual allowance charge due, given that it is not expected that scheme administrators will know what any individuals income is for any tax year.

If you have any views on how the current rules could be changed to help individuals but without over burdening scheme administrators please send these to pensions.policy@hmrc.gsi.gov.uk.

Scheme administrators are also reminded that from 6 April 2016, as part of the changes for the tapered annual allowance, all pension input periods should be aligned with the tax year, regardless of whether or not the members are likely to be affected by the taper.

4. Relief at source - annual returns of individual information for tax year 2014 to 2015

In Pension schemes newsletter 69 we reminded scheme administrators of pension schemes operating relief at source to submit the annual return of individual information for tax year 2014 to 2015 (also known as the RPSCOM100(Z)) to HMRC by 5 October 2015.

Failure to submit this information by the deadline will hold up any subsequent interim repayments pending receipt of the information. Where a submission is made, but fails processing, this is still deemed to be outstanding and any subsequent interim repayment claims will be stopped pending re-submission.

You can find more information on relief at source repayments and the member information we ask for relating to relief at source.

5. Pension flexibility statistics

As part of our monitoring of the impact of pension flexibility, we continue to review the number of pension flexibility payments made and in future we will publish pension flexibility statistics on a quarterly basis from autumn 2015, on the official GOV.UK statistics website. We aim to provide more information on the specifics of the publication in the next pension schemes newsletter.

6. Lifetime allowance

In Pension schemes newsletter 70 following the announcement that the lifetime allowance for pension savings will be reduced from £1.25 million to £1 million from 6 April 2016, we explained that 2 protection regimes will be introduced which will have the same conditions as the previous fixed and individual protection regimes for individuals who want to rely on them.

We aim to provide more detail around the new protection regimes in the next pension schemes newsletter which we plan to publish around September. The legislation for these protection regimes is expected to be included in Finance Bill 2016 which is likely to be published in draft before the end of this year.

In the meantime you should consider what communications you need to remind your members that for the new ‘fixed protection’ they must have no benefit accrual after 6 April 2016, and for the new ‘individual protection’ they must have savings of at least £1m on 5 April 2016.

7. Pension scheme registration certificates

Following routine changes made to the online system announced in Pension schemes newsletter 70, the pension scheme registration notification service has been updated.

If we decide to approve an application for registration of a pension scheme, as scheme administrator you will now receive a noticeboard message informing you that the status of the pension scheme has been updated. Within this message, there is now a ‘view certificate’ link that allows you to view and print a copy of the pension scheme registration certificate. You will still receive the formal certificate by post.

A copy of the certificate will also be stored under ‘view notices’ for each individual pension scheme registered.

8. Pension liberation message

Pension liberation and pension scams continue to put pension savings at risk. Promoters are using sophisticated liberation models to encourage taxpayers to access their pension savings early or transfer their hard-earned savings into scam pension schemes with little or no return on their investment.

Our work with the Pensions industry and other government departments and agencies to identify intelligence and look at ways we can reduce the opportunity for individuals to lose their pension savings through liberation schemes and pension scams is ongoing. However, pension scammers are continually looking for new ways to target individuals and their pension savings.

Whilst the action we are taking to prevent these sorts of arrangements from operating goes some way to help protect pension savings, the responsibility for getting the right advice lies with the pension scheme member. We want members to make the right decisions about investments and to understand the consequences of not seeking proper advice.

There is a range of information available to members who might be thinking about what to do with their pension savings. Please signpost your members to this information on the Pensions Regulator website, wherever possible.