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My PFS - Technical news - 03/02/2015

Publication date:

02 February 2015

Last updated:

06 July 2018


Technical Connection

PFS news update from 14 January 2015 - 27 January 2015 covering taxation, pensions and investments.

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Taxation and trusts

Online wills database made available to the public

HM Courts & Tribunals Service has launched a new online database which will allow members of the public to search for and obtain electronic copies of historic Wills within 10 working days and without having to either attend the probate registry or pay a search fee.

The database, which is populated with 41 million scanned documents, can be searched for Wills and grants of representation relating to Wills proved in England and Wales dating back to 1858. To use the basic search facility, only surname and year of death are required although records can be narrowed down using the advanced search facility where further information (such as date of death and first name) is available. New probate records will appear online approximately 14 days after a grant of representation has been issued.

Electronic copies of records can be obtained at a cost of £10 per document.

A Will remains a private document, rather than a public document, unless and until a grant of probate is made. After this time, the Will becomes a public document and anyone can apply for a copy of it.

The new database provides a fantastic resource for family historians and researchers who will now be able to quickly find Wills dating back as far as 1858 without the inconvenience of having to either attend the probate registry in person or incur the additional costs associated with an application for a general search.

Consultation on early closure for tax enquiries

The consultation broadly examines the current enquiry process and the restrictions it puts on HMRC when resolving one or more aspects of an enquiry. HMRC is seeking views on how to streamline the tax enquiry process so that certain parts of an enquiry can be closed in cases where it is not appropriate to close the entire enquiry. The current rules are inflexible and enquiries can take a long time to settle.

The proposals also include changes to rules so that earlier payment can be made in respect of aspects of the enquiry which has been successfully concluded by HMRC.

This consultation proposes changes to the self-assessment enquiry framework in respect of income tax, including National Insurance contributions (NICs) Class 2 and 4 in certain circumstances, capital gains tax and corporation tax.

The consultation will run until 12 March 2015 and it will be interesting to see whether any changes are made.

Class 2 NICs will be payable via self-assessment

Currently, Class 2 National Insurance contributions (NICs) are payable through a bank, post office or by post. From April 2015, most self-employed people will be able to pay their Class 2 NICs through self-assessment, together with any income tax and Class 4 NICs that are due.

As a result HMRC is no longer accepting any new direct debit applications to pay Class 2 NICs. Instead, HMRC will be writing to taxpayers to explain that instead of setting up a direct debit, a request for payment will be sent in April 2015 asking for payment of any outstanding contributions up to 11 April 2015.

These planned changes from April also mean that clients will no longer need to apply or re-apply to defer payment of Class 2 and Class 4 contributions; and any new applications to defer payment will not be processed.

This measure comes as a result of the Government wishing to simplify the way in which self-employed people pay their NICs - essentially payment of income tax and NICs through self-assessment should result in a more 'joined-up' system which is easier to follow as both taxes will be aligned with one another.

The Office of the Public Guardian plans overhaul of regime for supervision of deputies

The Public Guardian has presented a report to Parliament outlining its plans for a brand new regime which will transform the way it supervises Court- appointed deputies. The report contains proposals for annual deputyship plans, asset inventories and charging estimates - addressing concerns raised by MPs over the high charges levied by some professional deputies.

In August 2014, the Government issued a response to its consultation, 'Transforming the services of the Office of the Public Guardian - enabling digital by default' which ran from 15th October to 26th November 2013 and was informed by the findings of a fundamental review carried out by the Office of the Public Guardian (OPG) into the way that Court-appointed deputies are supervised.

The review was driven by a number of factors including unprecedented and continuing growth in the number of cases under supervision; concerns surrounding some of the charges being made by professional deputies in specific cases as well as the introduction of the Care Bill and the launch of the Government's 'Dementia Challenge'.

The OPG is now actively planning the implementation of a range of measures which, together, constitute a brand new delivery model for how it supports and supervises Court-appointed deputies and has presented its recommendations to Parliament in a 35-page report.

Features of the proposed new model include:

  • Staff who have been fully trained to support, supervise and specialise in a particular deputy type;
  • Better control of professional deputy charges through annual plans; asset inventories; estimates of charges; fuller annual reporting; and the better understanding of the professional deputy caseload resulting from the specialist teams building their knowledge and relationships;
  • Standards for professional and local authority deputies which set out good practice;
  • Targeted visits to deputies who need face-to-face support; and
  • Better guidance for people who apply to the Court of Protection

Some changes have already taken effect (most notably the segmentation of supervisory staff into separate teams dealing with lay, local authority and professional deputies); while other measures will continue to be deliberated with a view to implementation during this year. The OPG will launch a public consultation on the fees charged for supervising deputies this Autumn.

Deputies are appointed by the Court when a person loses their mental capacity and has given no other person the authority to make a decision on their behalf. The new delivery model for

Supervision is designed to provide a high level of assurance that people lacking mental capacity who are under a deputyship order are being protected and their needs are being met.

The full texts of the EU's Fourth Money Laundering Directive are now available

The agreed texts of the EU's Fourth Money Laundering Directive and its associated regulations are now available.

As a reminder, the Directive will not force the public naming of trust beneficiaries which comes as welcome news after representative bodies pointed out that trusts were regularly used to protect vulnerable beneficiaries, some of whom could be at significant risk if their identities were published.

It is likely that the development of public registers for companies and foundations will produce some significant challenges and it will be interesting to see how this progresses.

Have your say

The Government encourages open and transparent policy-making and, to this end, is seeking your views on what you would like to see in Budget 2015 - which will take place on Wednesday 18 March.

Your views will be considered by HM Treasury as part of the policy-making process and should be submitted by Friday 13 February 2015.

More information is on the HMRC website.

A record number of self-assessment returns expected

With self-employment on the rise in the UK, it is estimated that 11.2 million people need to fill out a self-assessment tax return for 2013/14 - which is a higher figure than ever before.

In addition, this is the second year in which those with a high income (£50,000 or more) and in receipt of child benefit (or whose partner receives child benefit) are now required to file a self-assessment return. This further increases the number of returns which are required to be filed.

It appears that those aged between 18 and 20 and living in London are likely to be the worst offenders for filing their return late whereas figures from last year showed that the over 65s were the most punctual.

Taxpayers who miss the 31 January deadline will be fined £100, whether or not they actually owe any tax. If the return is still outstanding after three months a charge of £10 per day for the next 90 days will be applied.

The transfer of ISA benefits to a surviving spouse/civil partner

Following the announcement in the Autumn Statement regarding the ability to transfer ISA benefits to a surviving spouse/civil partner on death, the Government has now published a policy paper and draft regulations to implement this change.

Broadly, this measure will enable, from 6 April 2015, the spouse or civil partner of a deceased ISA saver, where death occurred on or after 3 December 2014, to benefit from an additional ISA allowance and therefore to have more of their savings in a tax-advantaged wrapper.

Under the new rules, individuals will be permitted to save an additional amount in an ISA, up to the value of their spouse or civil partner's ISA savings at the time of death, without this amount counting against the surviving spouse's/civil partner's normal ISA subscription limit.

The new 0% starting rate of income tax - A practical reminder


At Budget 2014, the Government announced that it would be abolishing the 10% starting rate of tax for savings income with effect from 6 April 2015 and replacing it with a new 0% rate to provide further support for low earners. In conjunction with this, the amount of income to which the starting rate will apply is to be increased from £2,880 to £5,000 so that, in tax year 2015/16, those with a total income of less than £15,600 (£10,600 personal allowance for 2015/16 plus the new 0% starting rate band) will pay no tax on their savings. This article provides an overview of how the 0% starting rate band will operate and a reminder of the planning opportunities available to savers.

The basic position

From 6 April 2015 the 10% rate that currently applies to savings income falling within the starting rate band of £2,880 will be abolished and replaced with a new 0% rate that will apply to the first £5,000 of savings income received by those with a total income below the sum of their personal allowance and the new £5,000 'nil rate' band.

As non-savings income is always taxed before savings income, the new tax-free £5,000 starting rate band can only apply to those earning less than the total of their personal allowance and the 0% starting rate band. For most people this means that earned (non-savings) income must be below £15,600 (2015/16). However, the figure may be higher for people born before 6 April 1938 or those entitled to married couple's allowance or blind person's allowance. Eligible savers will be able to register with their bank or building society for tax-free savings by completing a form R85.

The eligibility rules for completing a form R85 currently mean that an R85 can only be completed by a saver whose total taxable income for the tax year will be below their tax-free personal allowance. However, from 6 April 2015 these rules are also changing to ensure that any saver who is unlikely to be liable to tax on any of their savings income in the tax year can complete an R85 and register to receive interest without tax deducted - even if they pay tax on other (non-savings) income.

In practice this means that, if a saver's total taxable income will be below the total of their tax-free personal allowance plus the £5,000 starting rate limit for savings then, from 6 April 2015, they can register to have interest paid on their accounts, without tax deducted, using form R85. A separate form R85 must be sent to each institution with which an account is held.

Note, however, that because form R85 can still only be used wherenotax is likely to be payable on savings income, in cases where total income is greater than £15,600 but earned income is below £15,600 (so thatsometax is payable on interest), registration for tax-free savings will not be allowed. In these cases it will be necessary for the overpaid tax (i.e. up to the overall £15,600 threshold) to be claimed back from HMRC using form R40 or under self-assessment.


Karen receives £14,000 per year from job as a teaching assistant. Her tax-free personal allowance is £10,600 for the tax year 2015/16, so she will pay basic rate tax on £3,400 of her earnings. Karen also receives a further £2,000 a year in interest from cash held on deposit, bringing her total income up to £16,000 per year.

As her total income is greater than £15,600, Karen is not eligible to register for tax-free savings. However, because the personal allowance and the starting rate band are not taken up entirely by earned income, she will be able to claim back the basic rate tax deducted at source from £1,500 of her gross savings income by filling out a form R40 and sending it to HMRC.

What is savings income?

For the purpose of the 'starting rate for savings' (ITA 2007 s12) income falling within the definition of "savings income" (ITA 2007 s18) includes:

  • interest from bank and building society accounts;
  • interest distributions from authorised unit trusts and open-ended investment companies;
  • income which is not interest, such as the profit on government or company bonds which are issued at a discount or repayable at a premium;
  • the interest element of purchased life annuity payments; and
  • gains from policies of life insurance (onshore and offshore)

While it is possible for eligible savers to register with banks and building societies to have interest from their accounts paid gross (i.e. without tax deducted), other forms of savings income may, by their nature, have to be paid net of basic rate tax. In many cases, it will be possible for a non-taxpayer to reclaim the overpaid tax by self-assessment or by completion of a form R40. However, this may not always be possible (for example, in the case of onshore bonds where the basic rate tax credit represents the tax deemed to have been paid on the underlying funds and is not reclaimable).

Note that savings income for the purposes of s12 ITA 2007 does not include (inter alia):

  • Dividend income;
  • Rental income;
  • Pension income;
  • Income received from a discretionary trust; or
  • Foreign income charged to tax on the remittance basis

Simple planning strategies

Simple planning strategies to make use of the starting rate band include:

1. Transferring assets between spouses to ensure that:

  • a non-earning spouse receives savings income of £15,600 to facilitate full use of his or her personal allowance and starting rate band of £5000; and
  • a spouse in receipt of earned or pensionable income below £15,600 receives sufficient savings income to ensure that the starting rate band is fully utilised

2. Investment in non-income producing offshore investment bonds - chargeable event gains qualify as 'savings income' for the purpose of the starting rate band which means that where the bond is encashed by a non-taxpayer, up to £15,600 (tax year 2015/16) of the gain could be tax-free. The non-taxpayer for these purposes could include a non-earning spouse or adult child of university age.

 For added control, the bond investment need not be transferred into the ownership of the ultimate recipient until the encashment is to take place. Assignment by way of gift is not a chargeable event and, provided the gift is made with no strings attached (i.e. the donee is able to use the funds as he or she pleases), there should be no adverse tax implications for the donor.

Note that this strategy will not work with an onshore bond due to the fact that basic rate tax is deemed to have been paid at source and the gain is therefore only subject to tax at the higher and additional rates with no reclaim of tax deducted at source available.


The Government expects around 1.5 million individuals to potentially benefit from a tax reduction on their savings income, and around half of these individuals to benefit by more than £50 per year. It estimates that over one million individuals will no longer be liable for tax on any of their savings income as a result of this change. Allowing eligible savers to register with a bank or building society for interest to be paid gross (without tax deducted) will remove the need for many to reclaim tax from HMRC, and will therefore provide a significant simplification. As well as savers with low overall incomes, this measure will also benefit some individuals with average or higher incomes whose income is primarily interest on savings.

Details of how to register for interest to be paid without tax deducted after 6 April 2015, and the relevant R85 form are expected to be published shortly.

Consultation on an increased minimum period for which the remittance basis charge applies

In last year's Autumn Statement, the Government announced it would consult on making the claim to pay the remittance basis charge apply for a minimum of 3 years.

This consultation is aimed at understanding why individuals choose not to pay the remittance basis charge each year and why this can change from year to year.

It also seeks views on how a minimum claim period for the charge might apply and considers alternatives that would also meet the Government's objectives.

The consultation period runs until 16 April 2015.

This area of taxation can be complicated and those falling into this category would need to make a choice between paying tax on the arising basis, i.e. on all income and gains wherever they arise, or on the remittance basis. Of course, the remittance basis of taxation is ideal for clients who have substantial offshore income and gains which would otherwise result in a higher liability to tax if they were taxed on the arising basis and therefore the ability to make a choice has been valuable. If this change is implemented then non-UK domiciled individuals will be more restricted as they would have to pay the charge for a set period that is longer than the current one-year period.


Investment Planning

Review of UK consumer price statistics

The UK Statistics Authority has published an independent review of UK consumer prices statistics.

Paul Johnson is Director of the Institute for Fiscal Studies, a job once held by Sir Andrew Dilnot, Chair of the UK Statistics Authority (UKSA). It is therefore not surprising that the UKSA commissioned Mr Johnson to produce a review of UK consumer price statistics. The review was prompted by the fall-out from the former National Statistician's earlier consultation on the future of the Retail Prices Index (RPI), which was demoted from being a National Statistic in March 2013.

Paul Johnson's paper makes two dozen recommendations, including:

  1. Office for National Statistics should move from CPI to CPIH as the main inflation measure.  The Consumer Price Index (CPI), which is the Government's preferred inflation yardstick and EU benchmark, does not include owner-occupied housing costs. CPIH, which was introduced in 2013, rectifies this omission and is thus the nearest readily available and reliable alternative to the discredited RPI.
  2. The Government and regulators should work towards ending the use of the RPI as soon as practicable. As RPI does not have an official status, its continued existence is only justified by the fact that the Index is hard-wired into many contracts, notably £470bn of index-linked gilts. However, where the RPI is currently used for the basis of price increases (eg rail fares, water charges), the Government could move to CPIH when the next round of adjustments is made.
  3. Take more care with weightings.  The weightings of various items in an index can produce distortions because the National Accounts data on which the weightings are based are inevitably historic. Johnson quotes the example of gas and electricity, where the severity of the winter two years ago impacts thecurrentweighting of domestic fuel in the index. His proposed solution is to use more than one year's set of National Accounts.
  4. Include Council Tax in the CPIH. Council Tax is not included in the CPI or CPIH, the reason being that direct taxes (like income tax) are deemed not appropriate for a price index and council tax is, for this purpose, classified as a direct tax. However, council tax can be viewed as standing in place of VAT (an indirect tax) on housing and VAT is in the indices.

Inflation has fallen out of the political limelight, so now is probably a good time to bring its measurement properly up to date. But with the longest index-linked gilt running to 2068, the RPI will not completely disappear for a very long while.

The December inflation numbers

Inflation on the CPI measure halved between November and December, bringing the rate down to 0.5%, its lowest since May 2000. The December inflation numbers from the Office for National Statistics (ONS) were well below market expectations of about 0.7%, but still leave UK inflation in positive territory, whereas Eurozone inflation has dropped to -0.2% according to provisional estimates. The CPI showed prices were flat over the month, whereas between November and December 2013 they rose by 0.5%.

The CPI/RPI gap widened slightly this month, with the RPI dropping 0.4% on an annual basis to 1.6%. Over the month, the RPI rose by 0.2%.

The CPI annual rate fall from November to December was driven by three main factors according to the ONS:


  • Housing & household services: Overall prices were unchanged between November and December this year, compared with a rise of 2.3% between the same two months a year ago. The majority of the downward contribution came from price movements for gas and electricity, where there were price rises from a number of the main suppliers a year ago, but none in 2014.
  • Transport: Overall prices fell by 0.2% between November and December 2014, compared with a rise of 1.0% between the same two months in 2013. Almost all of the downward contribution came from the plummeting price of petrol and diesel. The ONS says that the average price per litre was 116.8p for petrol and 122.9p for diesel, compared with peaks of 141.6p and 147.7p respectively recorded in April 2012. Last month's fuel price falls alone were worth about 0.15% off the CPI.


  • Alcohol & tobacco: Overall prices fell by 0.2% this year compared with a fall of 1.2% between November and December a year ago. The ONS believes that this is a Christmas time shift issue - in 2014 prices fell in November, whereas usually the fall occurs in December.

Inflation is likely to fall again in January. Petrol prices are still dropping fast (oil was below $45 a barrel when the inflation numbers were published).

The latest inflation drop will prompt the first exchange of correspondence between the Governor of the Bank of England and the Chancellor on anundershootingof the inflation target. In the past the letters would have been published almost simultaneously with the ONS data, but the Bank can now delay picking up its pen until the minutes of the next Monetary Policy Committee (MPC) meeting are issued (18 February). It looks likely that the February meeting is going to be in no rush to raise base rate, now that it matches inflation.

Pensioner Bonds

National Savings & Investments have announced that the Pensioner Bonds trailed in the March Budget and re-announced in December are on sale from 15 January.

The Bonds are available to purchase online, by phone (0500 500 000) or by post. Application at a Post Office is not possible.

The very attractive terms on offer mean that both the one and three-year issues are likely to sell out quickly. The total issuance is £10bn.

Mid January's 0.5% inflation figure has strengthened the possibility that there will be no base rate increase until next year. It has also underlined that the Pensioner Bond rates are much higher than they need to be.

Quantitative Easing

The European Central Bank (ECB) has announced that it will begin quantitative easing (QE) in March. But whether this move would make any difference to the Eurozone economies is unclear.

Taken together with other schemes the ECB is running to buy private sector debt, it means that from March the ECB will be pumping €60bn a month into the Eurozone. The informed view beforehand had settled on a €50bn figure. The ECB will buy bonds issued by Eurozone central governments, agencies and European institutions in the secondary market. As was widely expected (because of German views), the individual central banks of each Eurozone country will have to indemnify the ECB against any losses on their country's government bonds. However, there will be risk sharing between the Eurozone members for non-government debt (which should account for 12% of ECB purchases).

The ECB says that its actions signal "the Governing Council's resolve to meet its objective of price stability in an unprecedented economic and financial environment." Translated from Eurospeak, what the ECB is trying to do is push inflation back up towards its "below, but close to, 2%" medium-term target. January 2015's Eurozone inflation reading was -0.2%: the rate has been below 1% since October 2013.

Will it work? There are widely differing opinions on the answer.

Whereas QE in the USA and UK was designed to drive down medium and long-term interest rates, these have already sunk to historically low levels in the Eurozone: even Italy has to pay only 1.69% on 10 year government bonds. In terms of pump-priming the Eurozone economies by an injection of cash, it is arguable that it is not a shortage of money but an unwillingness to invest which is holding back the Eurozone.

On the other hand, QE should depress the value of the euro (already €1.32 against the pound), which should help exports to those countries outside the Eurozone. There is also a feeling that QE had to be tried because everything else has, so far, failed. 

It is arguable that this announcement will do nothing because most of its contents had been anticipated and priced in by the markets. This is the lesson from QE in the USA, albeit under rather different conditions.

Retail Prices Index - Thoughts on deflation

Deflation is the word of the moment, but what does is it mean? The answer is not as simple as "falling prices".

One of the reasons why the European Central Bank (ECB) has belatedly decided to embark on quantitative easing - see the previous article - is the spectre of deflation. Prices in the Eurozone fell by 0.2% in the year to December and this month's figure is expected to be around -0.5%. The ECB's target is for inflation to be "below, but close to 2% over the medium term", but Eurozone inflation has been below 1% since October 2013.

But do the negative CPI numbers really mean deflation? The answer is relevant not only to the Eurozone, but also potentially the UK, where the CPI could be nudging negative territory soon - it has only 0.6% to go.

While deflation is often thought of as simply the opposite of inflation, economists have a more nuanced definition. Typically, the economist's concept of deflation is a prolonged period of pervasive declining prices.This type of deflation normally goes hand-in-hand with minimal or negative economic growth, such as Japan has experienced for much of the last 20 years. If declining prices are widespread, the danger is that consumers do not spend and businesses do not invest: goods and services will be cheaper tomorrow than they are today, so why not wait?

The Eurozone and the UK are not experiencing that type of corrosive deflation yet. Arguably, both are more truly suffering a benign negative inflation. What has driven the year-on-year numbers down has been the fall in oil and fresh food prices. Look at the Eurozone and the -0.2% CPI inflation figure becomes core inflation of +0.8% once the volatile components of energy, food, alcohol and tobacco are stripped out. In the UK it is a similar story: the core inflation rate is currently 1.3% androse0.1% in December, whereas the CPI dropped 0.5%.

As several commentators have remarked, the fact that petrol prices are dropping each week does not prompt Joe Public to delay purchases of goods and services generally. Indeed, the cheaper petrol is the equivalent of a tax cut, increasing net spendable income and potentially boosting the economy. In the UK at least things are still quite buoyant.

There's deflation and deflation: so far we have the nice version, not the nasty one.



Pensions flexibility: QROPS changes

The Taxation of Pensions Act 2014 makes changes to the rules for individuals who have enjoyed tax reliefs on a pension scheme that currently forms part of a non-UK pension scheme (such as a QROPS). This will ensure that the flexibilities and restrictions to relief will apply equally to the "relieved part" of the QROPS.

In particular

  • There will be an extension to the scope of the existing power to make regulations in connection with information requirements for the scheme managers of qualifying recognised overseas pension schemes (QROPS). The amendment provides that regulations made under this power may also require the scheme manager of a QROPS or former QROPS to provide information
    • to the scheme administrator of a registered pension scheme or
    • to the scheme manager of a QROPS or former QROPS or
    • to a member or former member of a QROPS or former QROPS
  • In the future, a scheme manager must provide an undertaking to HMRC to comply with any prescribed benefit crystallisation information requirements. "Benefit crystallisation information requirements" includes prescribed information requirements relating to when an individual first flexibly accesses their pension rights.
  • Measures will be introduced so that certain tax charges apply to savings in non-UK pension schemes where those savings have benefited from UK tax relief.
  • A provision will be introduced so that the tax charges that apply in connection with the payment of an uncrystallised funds pension lump sum (UFPLS) can also apply to payments from a relevant non-UK scheme as if they were payments from a registered pension scheme.
  • A payment made from a relevant non-UK scheme will be taxed as a relevant withdrawal where tax is due under the member payment charges in Schedule 34 but the UK cannot immediately collect the tax under the terms of a double taxation agreement.
  • A provision will be introduced so that where overseas tax has been paid in respect of the relevant withdrawal, then any UK tax liability will be reduced by the amount of overseas tax paid.
  • The lower money purchase annual allowance of £10,000 will also potentially apply where an individual is or has been a currently-relieved member of a currently-relieved non-UK pension scheme and flexibly accesses pension rights under that non-UK pension scheme.
  • Any pension scheme that is or has been a QROPS will be treated as a registered pension scheme for the purposes of whether the money purchase annual allowance rules are triggered in respect of individuals with UK tax relieved savings in that QROPS. This ensures that where the equivalent of an UFPLS is paid, or payments are taken from the equivalent of flexi-access drawdown fund from a QROPS, this counts as a trigger for when then the individual flexibly accesses their pension rights. This means that the money purchase annual allowance potentially applies from that date if the individual continues to contribute to a registered scheme or currently-relieved scheme.
  • Where an individual first flexibly accesses their pension during a tax year, when calculating the amount of the pension input under a money purchase arrangement in a non-UK scheme for the periods before and after that first access, the same appropriate fraction for the tax year applies to both calculations.
  • An extension will be made to the scope of the existing regulation making powers in connection with the application of the annual allowance and lifetime allowance charges to members of non-UK schemes to provide that the regulations can include transitional provisions.
  • Currently when working out whether a member has lifetime allowance available after a relevant BCE has occurred, the value of any UFPLS paid since the relevant BCE is to be taken into account for various prescribed purposes. This will be amended so as to disregard the value of the relevant BCEs when calculating the member's available lifetime allowance.
  • When a relevant non-UK scheme pays an UFPLS after a relevant BCE has occurred, when working out how much lifetime allowance the member has available the value of any prior relevant BCE must be ignored. Also, the referable portion of any earlier PCLS or any earlier UFPLS paid since the relevant BCE is deducted even if the lump sum concerned has been paid since the member reached the age of 75 and the referable portion which would have crystallised by virtue of the member becoming entitled to a pension since the relevant BCE is deducted, (even if the member had reached the age 75 before becoming so entitled). The referable portion is the amount that relates to the funds that have received UK tax relief.
    • Amendments also change the start date from which scheme managers are required to re-notify their QROPS status to delay the implementation by 12 months. This is because before 6 April 2015 schemes would have to re-notify on the basis of the information in place at that time. As scheme managers can re-notify HMRC up to six months before they are due to do so, they provide the information changed as a result of the amendments in this Bill within 30 days of 6 April 2015. It would provide no benefit for schemes to notify HMRC twice in a short space of time

The Draft Overseas Pensions Scheme (Miscellaneous) Regulations 2015 were published on 17th December 2014 and make further changes to the QROPS regulations.

The notable amendments are:

  • An 'overseas pension scheme' must meet certain conditions in order to be a QOPS. The conditions are amended so that funds that have received UK tax relief are not required to use 70% of those funds to provide an income for the individual now that funds of registered pension schemes can be flexibly accessed. It also requires schemes established outside the European Economic Area that are not regulated as a pension scheme by a body in their home country to be operated by a pension provider that is regulated to provide pensions who is regulated to provide the scheme in question.
  • Conditions to be a 'recognised overseas pension scheme' which a scheme must meet in order to be a QROPS, are also amended so that pension benefits payable under a scheme as far as they relate to funds that have received UK tax relief, must be payable no earlier than they would be under the rules that apply to a UK registered pension scheme. This is intended to discourage people from transferring to overseas schemes so that they can access their UK tax-relieved pension savings before they would be able to under a registered pension scheme.
  • The information requirements on a scheme manager are amended. The Regulations sets out categories of information that a scheme manager is required to provide and removes the need, in the majority of cases, for the scheme manager, when reporting information, to consider whether the individual is (or has been in the last five full tax years) UK resident. It also changes the timing of the reporting of information so that a scheme manager of a QROPS has to report a payment within 91 days of the payment being made.
  • A further requirement is introduced for an individual making a transfer of pension savings from a registered pension scheme to a QROPS to supply information to the registered pension scheme when an individual flexibly accesses their pension rights. There is a new requirement for registered pension schemes to send that information about the individual member, and some extra information, to HMRC. The timing of reporting of information has also changed for a UK scheme. It will have to report a transfer within 91 days of it being made.
  • For a transfer to be made free of UK tax the scheme receiving the transfer must meet certain requirements. One of the conditions that a scheme can meet is that there is a double taxation agreement between the UK and the country in which the scheme is established which contains provisions about the exchange of information between the parties. This provision has now been extended to include tax information exchange agreements made under section 173 of Finance Act 2006. This will cover agreements that were not in existence when S.I. 2006/206 was first made.
  • These Regulations are draft and subject to a 4 week technical consultation.

Pensions Ombudsman rules in three more pension liberation/scam cases

The Pensions Ombudsman has recently published a further three determinations connected with "pension liberation" or "pension scams". They follow the publication on 16 December 2014 of the case of "Mr X" who had transferred almost £370,000 to a scheme investing in storage units and was unable to recover the money. That case showed just how risky these schemes can be.

In the cases published the complainants had all wanted to transfer away from their existing personal pension plan into a new plan which were supposed to be an occupational pension scheme registered with HMRC. In each case the three schemes to which the transfers were to be made to, were different. In each case, had declined to make the transfer.

These determinations should not be seen as:

  • helping "pension schemes" that may offer dubious freedoms,
  • serving as authority for genuine pension schemes to bar transfers on the grounds of mere suspicion or undisclosed information.

They do, however, provide some encouragement to schemes asked to pay a transfer value that have followed the regulatory guidance, obtained as much evidence as they can and made a reasoned decision about whether there is a right to transfer or not.

The Ombudsman's Approach

The three cases are similar and, in view of the public interest, the determinations all set out the regulatory, legislative and tax background in detail. They share some analysis and observations in common.

The Ombudsman noted that, following case law, when determining legal rights he has to reach a decision in effect equivalent to the decision a court would reach in the same circumstances. He considered whether the scheme members had a legal right to the transfer they had asked for, either in statute or under the transferring scheme's own provisions.

The Ombudsman found that there was no statutory right to a transfer in any of the cases. But in none of them had the provider carried out the analysis to establish that.

As a secondary matter the Ombudsman considered whether the providers' approaches had been consistent with their regulatory obligations, noting in two of the cases that the FCA regulated providers went beyond the Pensions Regulator's guidance.

However, in his concluding remarks the Ombudsman acknowledged that schemes and pension providers "find themselves in a highly unenviable position". He said that suspicions about pension liberation may justify delay for the asking of relevant questions. Strictly, though, a transfer could only be withheld beyond the statutory period for payment if there was no right to it. If, after enquiry, the trustees or providers concluded there was no right they should be able to justify that.

The three cases concerned are listed below, with a brief summary of the Ombudsman decision  


Decision Summary


Mrs Kenyon (Zurich)

The complaint is not upheld. Mrs Kenyon does not have a right to transfer, primarily because the Axiom UPT Scheme is not an occupational pension scheme as defined in the relevant legislation.


Mrs Jerrard (AVIVA)

The complaint is not upheld. Mrs Jerrard does not have a right to transfer, primarily because the SCCL Scheme is not an occupational pension scheme as defined in the relevant legislation.


Mr Stobie (Standard Life)

Mr Stobie did not have a statutory right to transfer, primarily because the transfer would not have secured "transfer credits" which, as defined in the relevant legislation, required him to be an earner in relation to the Scheme, which he was not. However, under the rules of the SIPP Standard Life had discretion whether to allow a transfer nevertheless, which they have not considered. The complaint is upheld to the extent that they should now do so.

We will now briefly consider the cases below:

Mrs Kenyon (Zurich) and Mrs Jerrard (AVIVA)

In the cases of Mrs Kenyon and Mrs Jerrard the Ombudsman found that there was no statutory right to transfer. The main reason was that the intended receiving schemes were not within the definition of "occupational pension scheme" in the Pension Schemes Act 1993. The schemes did not identify a clear class or "description" of employments of the people that they were to provide benefits for.

Mr Stobie (Standard Life)

In Mr Stobie's case, although the intended receiving scheme was an occupational pension scheme within the statutory definition, Mr Stobie was not an "earner" in relation to it so, as in the other two cases, the Ombudsman found he had no statutory right to transfer. However, under the rules of the Standard Life SIPP, Standard Life had discretion to pay a transfer value even where there was no statutory right. The Ombudsman found that Standard Life had not exercised discretion properly and directed them to consider payment.

But the Ombudsman added a "serious note of caution" suggesting that Mr Stobie should take professional advice from a properly authorised person before taking a step that was at the least high risk; at the worst he was about to be financially disadvantaged.


The three cases reflect the environment in relation to tax registration and regulatory guidance as it was when the applications to transfer were made. There have been changes since, particularly in registration requirements.

However, the three cases, alongside that of "Mr X" published in December, illustrate the difficulties for schemes and providers in dealing with possible pension liberation. Mr X took a transfer and may have lost all his money; Mrs Kenyon, Mrs Jerrard and Mr Stobie wished to make similar transfers and perhaps would have lost theirs too (though the Pensions Ombudsman Service had no evidence of that). But if the transferors had had a statutory right that they were determined to enforce, even in the face of severe warnings, then, after the providers had made such enquiries as thought necessary to establish whether the right existed, the providers could not have further resisted payment.

Statutory Money Purchase illustrations

Just over a year ago - when Mr Osborne's pension revolution was a mere twinkle in the Chancellor's eye - the Financial Reporting Council (FRC) signalled that it intended to undertake a comprehensive review of TM1, the document which sets out the basis for statutory money purchase illustrations (SMPIs). An exposure draft version 4.0 was issued and then the pension world began to change.

The results of the consultation on the draft have now emerged as version 4.1 of TM1. Perhaps surprisingly the FRC says that it does "not propose to make any significant changes to the existing method or assumptions" in version 3.0. However, there are three amendments which are worthy of note:

Future contributions under automatic enrolment Although TM1 requires future contributions to be taken into account, it does not state a basis for their projection. This has become an issue with the phasing in of auto-enrolment minimum contribution increases. The new TM1 will allow providers to "use their judgement to choose reasonable assumptions", which could mean ignoring the increases provided this is made clear in the statement.

Guaranteed annuity terms The current TM1 does not permit providers to take account of annuity guarantees which produce a higher amount of initial pension than the TM1 assumptions. The new TM1 gives providers discretion to take account of guaranteed annuity terms, should they deem them appropriate.

Same-sex marriage Same-sex marriage legislation has been in force in England and Wales since 13 March 2014, with the corresponding Scottish legislation effective from 16 December 2014. The current TM1 allows providers to use their judgement in determining the age difference to be assumed in same-sex marriages, but the new TM1 specifies that for same-sex marriages both spouses are the same age (mirroring the provision which already applies to civil partners).

The new TM1 comes into force for illustrations issued on or after 6 April 2015, although earlier use is permissible.

In the world of flexi-access drawdown, the next TM1 may need to revisit the idea of projecting pension amounts. 

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.


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