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Pensions update

Technical article

Publication date:

19 May 2020

Last updated:

18 December 2023

Author(s):

Technical Connection

Update from 30 April 2020 to 13 May 2020

Pensions Update

 

 

 

Pension Schemes Newsletter 119

(AF3, FA2, JO5, RO4, RO8)

HMRC Pension Schemes Newsletter 119 covers the following:

  • temporary changes to pension processes as a result of coronavirus (COVID-19)
  • re-employment in response to the coronavirus (COVID-19) outbreak
  • pension scheme returns for 2019 to 2020
  • benefits crystallisation event 1 and valuing sums and assets held within a registered pension scheme
  • other pension scheme valuations
  • pension flexibility statistics
  • registration statistics
  • annual allowance calculator
  • managing pension schemes service – timeline update
  • unauthorised payments – operating the mandating procedure
  • Gibraltar and the overseas transfer charge

Issues of particular interest

Re-employment in response to coronavirus outbreak – protected pension ages

On 22 April 2020 John Glen MP made a written ministerial statement to confirm that the Government intends to temporarily suspend tax rules that would otherwise apply significant tax charges to pension income received by recently retired individuals aged between 50 and 55. In line with this statement, if the nature of the employment is to undertake work in relation to the COVID 19 outbreak, then HMRC confirms that it accepts that the re-employment conditions have been satisfied.

This means that any payments made to those that would otherwise have been unauthorised payments will not be treated as such.

Pension Scheme returns

To help the issues providers are experiencing with getting the appropriate valuations for pension scheme returns HMRC have decided not to issue any notices to file pension schemes returns for 2019 to 2020.

Valuing assets for crystallisation events

HMRC have confirmed the process for valuing sums and assets in registered pension schemes where normal valuations are not available.

HMRC Annual Allowance Calculator

HMRC confirm that they have now updated the calculator to take account of the new tax year.

SIPPCHOICE Ltd Vs HMRC on in-specie contributions 

(AF3, FA2, JO5, RO4, RO8)

On the 12 May 2020 the Upper Tier Tribunal (Tax and Chancery) published the decision on the case of HMRC vs SIPPChoice Ltd, with regards to the payment of tax relief on in-specie contributions. 

HMRC had originally denied tax relief on some in-specie contributions which was successfully challenged by SIPPchoice Ltd in the First-tier Tribunal. This decision was then appealed by HMRC to the Upper-tier Tribunal. The outcome of this appeal went against the FTT decision finding in favour of HMRC. 

The full decision can be found here – HMRC vs SIPPChoice Ltd 

The ruling itself rested on the definition of “contributions paid”, the Judge agreed with HMRC that this definition can only refer to money and not transfer of assets made to pay off a debt created meaning that the payment were not themselves contributions so wouldn’t attract tax relief. 

Another issue considered was the reliance on the wording in the PTM that this was indeed acceptable practice, the Judge concluded that even if the guidance implied that in-specie contributions were acceptable that the legislation overrides any guidance given as it doesn’t have the force of law. This is of great concern because it implies that any decisions or actions taken because of guidance in an HMRC manual could still be challenged by HMRC themselves, should they so wish. 

It is unclear at this time if SIPPChoice Ltd will appeal this decision again. 

Comment 

Most if not all SIPP and SSAS providers suspended in-specie contributions when the first cases were challenged by HMRC. It is currently unclear what this will mean for those providers that accepted in-specie contributions that had their tax relief challenged. Much will depend on what SIPPChoice Ltd decide to do with regards to an appeal.  

What is does mean is that we won’t be seeing a return to in-specie contributions in the short term if ever.  

With regards to the reliance on PTM guidance, it has always been made clear from HMRC that is their interpretation of legislation but many will now be even more careful to be sure of understanding before following any detailed within.  

FCA/FOS: Complaints handing during the COVID-19 outbreak

(AF3, FA2, JO5, RO4, RO8)

The Financial Conduct Authority (FCA) has published correspondence between it and the Financial Ombudsman Service (FOS) concerning the latter’s approach to complaints handling during the COVID-19 outbreak. The two letters are:

  1. Letter dated 15 April 2020 from Sheldon Mills, Interim Executive Director of Strategy & Competition at the FCA to Caroline Wayman, Chief Executive and Chief Ombudsman at FOS.
  2. Letter dated 16 April 2020 from Caroline Wayman, Chief Executive and Chief Ombudsman at FOS responding to Sheldon Mills, Interim Executive Director of Strategy & Competition at the FCA.

In simple terms the FCA was seeking clarity from FOS that in the light of its COVID-19 related “emergency” guidance and easements that in the case of future complaints coming to FOS they would, “in determining what is fair and reasonable in all the circumstances of the individual case, the ombudsman will take account of the operational challenges faced by firms during this period, and the FCA’s revised expectations of what constitutes compliance with our rules, guidance and standards, as well as what counted as good industry practice at the time”.

Caroline Wayman replied that “in deciding what is fair and reasonable in the circumstances of an individual complaint, we must take into account relevant law; regulators’ rules, guidance and standards; codes of practice and what the ombudsman considers to have been good industry practice at the time. We do not make decisions with the benefit of hindsight.”

 

PPF publishes updated PPF 7800 index – May 2020 

(AF3, FA2, JO5, RO4, RO8)

Since July 2007 the Pension Protection Fund has published the latest estimated funding position, on a s179 basis, for the defined benefit schemes in its eligible universe.  

May 2020 Update Highlights 

  • The aggregate deficit of the 5,422 schemes in the PPF 7800 Index is estimated to have decreased to £128.5 billion at the end of April 2020, from £135.9 billion at the end of March 2020.
  • The funding ratio increased from 92.5 per cent at the end of March 2020 to 93.1 per cent.
  • Total assets were £1,745.6 billion and total liabilities were £1,874.1 billion.
  • There were 3,503 schemes in deficit and 1,919 schemes in surplus.
  • The deficit of the schemes in deficit at the end of April 2020 was £256.4 billion, up from £254.1 billion at the end of March 2020.

Funding comparisons 

 

April 2019 

March 2020 

April 2020 

Aggregate funding position 

£22.1bn 

-£135.9bn 

-£128.5bn 

Funding ratio 

101.4% 

92.5% 

93.1% 

Aggregate assets 

£1,612.1bn 

£1,680.5bn 

£1,745.6bn 

Aggregate liabilities 

£1,590.0bn 

£1,816.4bn 

£1,874.1bn 

Dataset / Assumptions 

Purple 19 / A9 

Purple 19 / A9 

Purple 19 / A9 


The PPF 7800 index is published on the second Tuesdayof every month, and the PPF publishes The Purple Book each year.  

This document is believed to be accurate but is not intended as a basis of knowledge upon which advice can be given. Neither the author (personal or corporate), the CII group, local institute or Society, or any of the officers or employees of those organisations accept any responsibility for any loss occasioned to any person acting or refraining from action as a result of the data or opinions included in this material. Opinions expressed are those of the author or authors and not necessarily those of the CII group, local institutes, or Societies.