The scheme administrator: liability on appointment of an independent trustee
If a new scheme administrator is an ‘independent trustee’ (see below for definition) or has been appointed by such a trustee they may not inherit all the outstanding liabilities of the previous scheme administrator.
What is an independent trustee?
A trustee is an independent trustee if they were:
- appointed on or after 1 September 2014 by or in pursuance of an order made by the Pensions Regulator under section 7 of the Pensions Act 1995 or Article 7 of the Pensions (Northern Ireland) Order 1995, or by a court on an application made by the Pensions Regulator, and
- not a trustee of the pension scheme at any time before any such appointment.
Independent trustees who are also the scheme administrator
Section 272A Finance Act 2004
The independent trustee will assume scheme administrator liabilities arising on or after the date of their appointment. However they will not assume most pre-existing scheme administrator liabilities - as listed below.
Liabilities not transferred to the independent trustee
Liability for the following tax charges under Finance Act 2004 (and any interest in respect of late payment of these tax charges):
- the short service refund lump sum charge - section 205,
- the serious ill-health lump sum charge - section 205A (charge could only apply to payments made before 16 September 2016),
- the special lump sum death benefits charge - section 206,
- the authorised surplus payments charge - section 207,
- the lifetime allowance charge (under section 214) in respect of benefit crystallisation events occurring before the independent trustee was appointed, and
- the scheme sanction charge under section 239 in respect payments or scheme chargeable payments made before the independent trustee was appointed. For scheme chargeable payments this includes an appropriate proportion of the scheme sanction charge arising from income or gains from taxable property due for the tax year that the independent trustee was appointed.
However if the independent trustee was a scheme administrator of the scheme at any time before their first appointment as independent trustee for that scheme this carve out from transfer of scheme administrator liabilities will not apply. In these circumstances the independent trustee will inherit any existing scheme administrator liabilities in the usual way (see PTM154000) when they become scheme administrator.
Previous scheme administrator retains liability
The scheme administrator in place when the independent trustee was appointed retains responsibility for the liabilities listed above. If there was no scheme administrator immediately before the independent trustee was appointed those liabilities are assumed by the person(s) who were the last scheme administrator in place before the appointment of the independent trustee.
Person(s) appointed as scheme administrator by an independent trustee
Section 272B Finance Act 2004
Similar rules apply in the case of someone appointed as scheme administrator by an independent trustee. For these special rules to apply that person must not have been a scheme administrator at any time before the first independent trustee was appointed to the scheme.
The person appointed as scheme administrator will not assume any of the tax liabilities listed above that pre-existed the date that the first independent trustee was appointed to the scheme. Those tax liabilities will be retained by the previous scheme administrator as described above.
Default on retained liabilities
Section 272C Finance Act 2004
- there is nobody who retains liability to the pre-existing tax charges (as the last scheme administrator has ceased to exist), or
- the person who has retained liability to the pre-existing tax charges cannot be traced or is in serious default.
liability to any outstanding pre-existing tax charges is passed on to other person(s) in accordance with the rules set out at PTM155000.
However an independent trustee cannot inherit any pre-existing liabilities under these default rules by virtue of being a trustee or someone who controls the management of the scheme.
A person appointed by an independent trustee to be the scheme administrator cannot inherit any pre-existing liabilities under these default rules by virtue of being someone who controls the management of the scheme.