Pensions: treatment of alternatively secured pensions from 6 April 2007: pension scheme rules for members who cannot be traced
For providers that had been using ASP funds as a means to hold in suspense the funds of members that they have been unable to trace by age 75, alternative provisions were included in FA07. Schemes now need to take reasonable steps to trace a member. If schemes do not know the whereabouts of the member the funds (which are deemed to be designated into unsecured pension) will effectively be held in suspense and will not become ASP funds. This will take effect on the member’s 75t h birthday
There will be no requirement to operate a minimum income on these pension arrangements while the member can’t be traced. But where a member is subsequently traced they will have the choices that would have been available to them at age 75. If they don’t make a decision within 6 months of being traced then the minimum income requirements will start to apply.
Where the pension scheme becomes aware that the member has died (after age 75) then the remaining funds can be paid to charity or as a pension for a dependant without attracting an unauthorised payment charge. There is no Inheritance Tax charge if that dependant is a ‘relevant dependant’ (IHTM17354) . If the fund is in these circumstances reallocated to the pension pots of other members then there will be an unauthorised payments charge and an Inheritance Tax charge (IHTM17451).
For schemes with members over the age of 75 where the pension funds are currently held under the ASP provisions because they have been unable to trace the member, the funds will cease to be held as ASP funds and instead be held under the separate provisions for untraced members, on or after 6 April 2007. This will be subject to the scheme having taken reasonable steps to trace the member.
Any cases where the scheme member cannot be traced should be forwarded for advice to Technical.