PFS What's new bulletin - April I

TAXATION AND TRUSTS

Probate fee increase

(AF1, RO3)

 

The Ministry of Justice (MoJ), published a consultation paper ‘Implementing increases to selected court and tribunal fees’ in November 2023. The standard probate fee, will be raised by £27 to £300 in May 2024.

 

The consultation invited comments on the proposal to increase a selection of court and tribunal fees by 10% to partially reflect changes in the consumer price index (CPI) since 2021, the last time that fees were increased. This included asking for views from the public on the principle of increasing fees to reflect changes in the general level of prices, the scope of the fees that we proposed to increase, and the impact of the proposals on individuals with protected characteristics. Comments were also sought on two further proposals. The first was to establish a routine approach to updating fees every two years, accounting for changes in the general level of prices and His Majesty’s Courts and Tribunals Service (HMCTS) costs; and secondly, to set the council tax liability order fee under the Lord Chancellor’s ‘enhanced’ power. This power would allow the MoJ to set the fee at a value above its underlying cost to HMCTS to account for regular fluctuations in its cost, and therefore to retain the fee at its current value of £0.50p. The consultation period closed on 22 December 2023.

 

The Government said that, after careful consideration of the consultation responses received and further analysis of the costs underpinning fees, it had decided to proceed with increases of 10% to 172 of the 202 fees originally proposed. In light of the feedback from the consultation, the Government decided to not increase the divorce application fee from its current level of £593, at this moment in time. The same fee also applies to an application for nullity or civil partnership dissolution. The £95 fee for amendment of application for matrimonial or civil partnership order, and the £245 fee for answer to an application for a matrimonial or civil partnership order, also remain unchanged. England and Wales Court of Protection hearing fees are also unchanged at £494, though the fees to apply for action under, a hearing under, or to appeal a decision made under the Mental Capacity Act 2005 are among those being increased by 10%. The Government decided to retain the current value of the council tax liability order fee at £0.50p.

 

The standard probate fee will be raised by £27 to £300, despite objections on the grounds of current poor levels of service. Some respondents also mentioned that the digitisation of probate applications and streamlining of the administration process should have resulted in significant reductions to its service cost. Nevertheless, the ministry replied that probate fees are only payable for estates with a value above £5,000 and are recoverable from the estate once probate has been granted. It noted that it had incurred costs in taking action to improve performance and reduce the causes of delays, and was recruiting and training more staff to increase the number of grants being processed.

 

Please see here for the full list of fee changes.

 

Increases to the 172 fees will be effected by a negative statutory instrument which will come into force in May 2024. The changes will include amendment to fees in the following Fee Orders:

 

• The Enrolment of Deeds (Fees) Regulations 1994
• The Non-Contentious Probate Fees Order 2004
• The Court of Protection Fees Order 2007
• Magistrates’ Courts Fees Order 2008
• Family Proceedings Fees Order 2008
• Civil Proceedings Fees Order 2008
• The Upper Tribunal (Lands Chamber) Fees Order 2009
• The First-tier Tribunal (Gambling) Fees Order 2010
• The Upper Tribunal (Immigration and Asylum Chamber) (Judicial Review) (England and Wales) Fees Order 2011
• The First-tier Tribunal (Property Chamber) Fees Order 2013

 

In addition, the Government will make routine updates to fees to account for changes in cost and CPI every two years, with the next review taking place in 2025/26, to prepare for implementation in 2026. This approach will align with other parts of the public sector and ensure that fees reflect the costs of providing Court and Tribunal services. It added that, as it will be routine, it will not hold a public consultation each time fees are updated in this way but will continue to engage with the Lord Chancellor’s statutory consultees in a timely manner.

 

An HMRC win against a promoter of tax avoidance

(AF1, RO3)

 

In the case of IPS Progression Limited, it was decided that the company was a promoter of a tax avoidance scheme.

 

Last year, HMRC introduced legislation intended to bring in tougher consequences for promoters of tax avoidance.

 

It set out proposals for a new criminal offence for promoters of tax avoidance schemes who fail to comply with HMRC’s notice to stop promoting an avoidance scheme and a proposal to expedite the disqualification of directors who promote tax avoidance.

 

Please also see HMRC’s guidance to the disclosure of tax avoidance schemes (DOTAS).

 

This case, which precedes these proposals, (TC09071), was about an application by HMRC for a determination by the Tribunal of a penalty (under s 98C of the Taxes Management Act 1970) for the Respondent’s failure to comply with s 308(3) of the Finance Act 2004. Section 308(3) FA 2004 requires a promoter of notifiable arrangements to provide HMRC with prescribed information within a prescribed period. The penalty for failure to comply is £600 for each day of non-compliance.

 

In 2016-2018, the Respondent, IPS Progression Limited, was an umbrella company providing PAYE payroll services in respect of individuals whose personal services were made available

by recruitment agencies to end users. Each of those individuals (“employees”) entered into three agreements with the company:

 

(1) an employment agreement that provided that they were an employee of the company,

 

(2) a loan agreement that provided that the company would loan “certain monies” to the employee with interest charged at 2% above HMRC’s official rate of interest, and

 

(3) a bonus agreement that provided that the employee could participate in a bonus scheme.

The company was using what was essentially a somewhat crude contractor loan scheme. Each week, the end users paid the company an hourly rate for the personal services of each employee.

 

From this, the company retained 15% as its management fee. The remaining 85% was paid over to the individual employees, shown on their payslips as three elements:

 

• Salary paid – an amount equal to the national minimum wage for the hours worked;
• Rolled up holiday pay – 12.07% of the salary paid, as no actual holiday pay was available for weeks when no work was done; and
• A bonus, which was described as an “ILO bonus” – the residue, which was in the form of a loan.

 

Tax and National Insurance were deducted in respect of the salary paid and rolled-up holiday pay elements only. IPS Progression Limited contended:

 

(1) that each amount of ILO bonus was a loan by the company to the employee under the loan agreement, and was accordingly not taxable, and

 

(2) that it was envisaged that the employees would repay the loans and accrued interest from future bonuses to be paid under the bonus agreements, and that these would have been subject to tax and National Insurance when they were paid.

 

However, the generality of the employees ultimately received no bonus.

 

Each employee was provided with:

 

• An employment agreement;
• A loan agreement providing that IPS Progression Limited would loan “certain monies” to them, with interest accruing at 2% over the HMRC official rate and (theoretically) repayable on demand at 60 days’ notice; and
• A bonus agreement suggesting the company could pay a bonus which, it was implied, might pay off the debt and interest represented by the ILO bonus sums.

 

IPS Progression Limited’s promotional material promised “Working with IPS Progression Ltd as an employee can offer returns of 85% of your contract value”. This attracted 1,593 employees to the scheme, generating management fees of around £3.6 million.

 

The directors of IPS Progression Limited decided that they were not required to submit Form AAG1 notifying HMRC of the scheme. HMRC felt otherwise.

Among correspondence with IPS Progression Limited’s accountants, HMRC wrote in 2018, 2021 and 2022, each time warning of its intention to apply to the tribunal for the determination of a penalty under s 98C TMA in respect of IPS Progression Limited’s failure to comply with its obligation under s 308(3) FA 2004.

 

Finally, on 14 April 2022, HMRC applied to the First-tier Tribunal (FTT). The company submitted Form AAG1 on 25 April 2022.

 

The issue before the FTT was whether a penalty was due since IPS Progression Limited had failed to make disclosure within the strict time limit of five working days after first becoming aware of any transaction caught by DOTAS.

 

The company argued that the scheme was not a notifiable arrangement under DOTAS, that it was not a promoter of those arrangements, and that therefore such no notification was due.

 

The Tribunal found that there was no realistic likelihood that loans would be redeemed using bonuses. It said the company never intended to operate a bonus scheme, or to pay bonuses to the generality of the employees. There was no evidence of any source from which money to fund a bonus scheme could plausibly have come:

 

1. The funds for a bonus scheme could not have come from the difference between the national minimum wage paid to employees and the actual amount that the end users had paid for their services. The amount of that difference had already been partly taken by the company as its 15% fee, and the remainder of that amount had been paid out to the employees as ILO bonus. That money was not available for the Respondent to invest in a bonus scheme.
2. The funds for a bonus scheme could not have come from the 15% fee that the company took. This 15% is described by the company as its “management fee”, and must have represented the company’s overheads and own profit from its business. The evidence is that employer National Insurance contributions were also paid out of this 15%. The ILO bonus was typically a substantial portion of the total amount paid by the end user, sometimes in excess of 50%. It would have required unrealistic returns on any remaining portion of the 15% taken by the company for this to have been able to generate enough funds to pay bonuses equivalent to all of the ILO bonuses that had previously been paid plus any accumulated interest.
3. The funds for a bonus scheme could not plausibly have come from any lending business conducted by the company. The company had said that it intended to conduct a separate business of lending money to those with impaired credit records, and that it was envisaged that the profits from this would fund a bonus pool. The fact that the company obtained a lending licence from the FCA, and an e-mail from the group’s compliance manager to “all users” dated 3 April 2018, were said to evidence this. However, the company was not granted the licence by the FCA until 21 August 2017, some 16 months after it had already been providing its services. Even then, after obtaining the licence, the company never used it to establish any lending business. The Tribunal said that no clear reason had been given as to why not. The proposed lending business was subsequently superseded by another company in the group. However, there was no suggestion that the other company in the group conducted a lending business in order to generate funds to pay bonuses to IPS Progression Limited’s The Tribunal’s view was that, if IPS Progression Limited had genuinely intended to establish such a business for that purpose, it was difficult to see how that intention could have been superseded by the business of another company in the group.

 

The Tribunal concluded that the only form in which a bonus could realistically be paid was by cancellation of an employee’s loan debt and accrued interest. During the two years of the scheme, only 13 employees (of the 1,583 in total) were alleged to have received a bonus and, based on the evidence, this was indeed merely cancellation of some debt.

 

Even if the company had chosen to pay bonuses in this way to every single employee, it would not have sufficed to clear all of the constantly accumulating debt plus interest, since PAYE would have to be deducted, leaving only part of the bonus available to reduce debt. The evidence pointed to:

 

• No plausible method by which bonuses could be awarded or the loans repaid;
• The likelihood that no employee would have tolerated receiving the bulk of their earnings in the form of a loan which might actually be called in; and
• The simple fact that no loans were repaid even when employees left IPS Progression Limited’s employment.

 

Evidence statements suggested that employees did not expect bonuses to be paid.

 

The Tribunal concluded that the company “never intended to establish a genuine bonus scheme and never intended that the loans would be repaid. The practical effect was that employees were paid part of their taxable earnings tax-free.” It’s view was that the method by which the company provided its services, involving a loan agreement and bonus agreement, and the identification of part of the payments to employees as ILO bonus rather than as salary, served no purpose other than to provide a justification (whether or not valid or effective in law) for not paying tax on part of the employees’ earnings.

 

The Tribunal decided that the scheme constituted notifiable arrangements and IPS Progression Limited was a promoter in relation to them, and so had obligations under DOTAS.

 

It said that in the 2016/17 and 2017/18 tax years, the company’s business was a “relevant business” because it involved “the provision to other persons of services relating to taxation” within the meaning s 307(2)(a) FA 2004. In the course of that business, the company was “to an extent (and indeed, to a very large extent) responsible for the organisation and/or management of the arrangements.” Its arrangements were designed so employees received part of their otherwise taxable earnings tax free.

 

The Tribunal found that IPS Progression Limited did not provide HMRC with the prescribed information until some six years after expiry of the time limit for so doing, and had no reasonable excuse for the lateness.

 

 

 

 

 

 

 

 

INVESTMENT PLANNING

 

Corporate property ownership - ATED receipts increase for second year in a row

(AF4, FA7, LP2, RO2)

Annual statistics on receipts and liable declarations for Annual Tax on Enveloped Dwellings (ATED). The London boroughs of Westminster and Kensington and Chelsea continue to dominate for ATED receipts by location.

 

The ATED is an annual tax, payable mainly by companies that own UK residential property valued at more than £500,000. The dwelling is said to be 'enveloped' because the ownership sits within a corporate wrapper or envelope. The ATED is charged in respect of chargeable periods running from 1 April to 31 March each year. The ATED charges increase automatically each year in line with inflation (based on the previous September’s CPI).

 

In summary:

 

• ATED receipts in the 2022/23 financial year were £124 million, which is 4% (£5 million) higher compared to the previous year, £119 million, with the majority of price bands increasing compared to the 2021/22 financial year. This is with the exception of the £1 million to £2 million and £10 million to £20 million price bands which remained the same as the previous year;
• the number of liable ATED declarations in the 2022/23 financial year was 4,800, decreasing by less than 1% compared to the previous year, 4,810, with the largest change a 7% decrease for the £10 million to £20 million price band compared to the 2021/22 financial year;
• about 85% of ATED receipts are from London, which is unchanged from the 2021/22 financial year;
• the London boroughs of Westminster (48%), followed by Kensington and Chelsea (23%), still dominate the receipts by location for ATED;
• between the 2021/22 financial year and the 2022/23 financial year there has been a small decrease, less than 1% (140) in the number of relief declarations being made, from 22,910 to 22,770. this is the first year since ATED’s introduction that relief declarations have fallen;
• the type of relief comprising the largest share of relief declarations is rental relief, which accounts for 84% of all relief claims, compared to 79% for the 2021/22 financial year. Rental relief claims saw a 6% increase in the number of relief claims made in the 2022/23 financial year.

 

You can read the full statistical report here.

 

 

 

 

 

 

 

March inflation numbers

(AF4, FA4, FA7, LP2, RO2)

The UK CPI inflation rate for the March 2024, which was 3.2%, 0.2% down from February.

 

 

The CPI annual rate for March was down 0.2% from February at 3.2%, 0.1% above the Reuters consensus forecast of 3.1%. Eurozone annual CPI inflation saw a 0.2% fall for March, leaving its annual rate at 2.4%, while the USA’s annual CPI inflation was up by a higher than expected 0.3% at 3.5%.

 

March 2024’s monthly UK CPI reading was up 0.6% from February’s. The CPI/RPI gap was unchanged at 1.1%, with the RPI annual rate also falling by 0.2% to 4.3%. Over the month, the RPI index rose by 0.5%.

 

The Office for National Statistics (ONS)’s favoured CPIH index was unchanged from February at an annual 3.8%. It is notable that, in March 2023, the CPIH was 1.2% below the CPI (8.9% against 10.1%) whereas now it is 0.6% above the CPI. A large part of that is down to the owner occupiers housing (OOH) category, which is up 6.3% over the past year and has a 16.5% weighting in the CPIH but is absent from the CPI.

 

The ONS attributed the reduced level of CPIH inflation to a combination of counterbalancing factors:

 

Main downward drivers

 

Food and non-alcoholic beverages. Prices for this division rose by 4.0% in the year to March 2024, down from 5.0% in February. The March figure is the lowest annual rate since November 2021. The rate has eased for the 12th consecutive month from a recent high of 19.2% in March 2023, the highest annual rate seen for over 45 years.

 

Prices rose by 0.2% between February and March 2024, compared with a monthly rise of 1.1% a year ago. Since early summer 2023 prices have been relatively high but stable, rising by less than 2% between May 2023 and March 2024. This compares with a sharp rise of around 22% seen between March 2022 and May 2023.

 

Overall, the annual rate eased in eight of the 11 food and non-alcoholic beverages classes, the exceptions being vegetables, hot beverages, and soft drinks.

 

Furniture and household goods. Prices fell by 0.9% in the year to March 2024, compared with a small rise of 0.1% to February. This is the largest annual fall in prices since September 2016 and the first negative rate since December 2020. On a monthly basis, prices rose by 0.3% between February and March 2024, compared with a rise of 1.3% a year ago.

 

Clothing and footwear. Prices rose by 3.9% in the year to March 2024, down from 5.0% the previous month. The rate in March was the lowest since November 2021. On a monthly basis, prices rose by 0.6% between February and March 2024, compared with a rise of 1.6% a year ago. This reflects the incidence of discounting, which fell by less this year than a year ago. Prices tend to rise between February and March as new season stock continues to enter the shops but the rise in 2024 was less than in most recent years.

 

The downward effect came principally from women’s clothing and footwear, with prices rising on the month but by less than a year ago.

 

Main upward drivers

 

Housing and household services. The overall easing in the inflation rate was partially offset by an upward effect from housing and household services, whose annual rate was 3.1% in March 2024, up from 2.9% to February. This compares with a recent annual peak of 11.8% seen in January and February 2023.

 

The increase in the annual rate reflected an upward effect from OOH costs which, as mentioned above, rose by 6.3% in the year to March 2024, compared with a rise of 6.0% to February. The OOH annual rate was the highest since July 1992.

 

Transport. Prices in the transport division fell by 0.1% in the year to March 2024, compared with a fall of 0.4% to February. The annual rate has been negative for the last five months.

 

The small overall change in the annual rate masks offsetting movements in some of the transport categories, with a large upward effect from motor fuels partially offset by smaller downward effects from second-hand cars, rail fares and air fares.

 

The average price of petrol rose by 2.6 pence per litre between February and March 2024 to stand at 144.8 pence per litre, down from 146.8 pence per litre in March 2023. Diesel prices rose by 2.8 pence per litre in March to stand at 154.1 pence per litre, down from 166.5 pence per litre in March 2023. These movements resulted in overall motor fuel prices falling by 3.7% in the year to March 2024, compared with a fall of 6.5% in February.

Second-hand car prices fell by 0.5% between February and March 2024, compared with a rise of 1.1% between the same two months a year ago. On an annual basis, prices fell by 7.3% in the year to March 2024, compared with a fall of 5.9% in February, the seventh consecutive month of falls.

 

The small downward effects from rail fares and air fares resulted from prices rising on the month this year by less than a year ago.

 

Six of the twelve broad CPI divisions saw annual inflation decrease, while five rose and one was unchanged. The category with the highest annual inflation rate was alcoholic beverages and tobacco (3.9% of the Index) which recorded a 12.1% annual increase. Seven divisions (Food and non-alcoholic drinks; Clothing and footwear; Housing, water, electricity, gas and other fuels; Furniture, Household Equipment and Maintenance; Transport and Education; Miscellaneous goods and services), accounting in total for 62% of the Index, posted an annual inflation rate below 5.0%.

 

Core CPI inflation (CPI excluding energy, food, alcohol and tobacco) fell 0. 3% to 4.2% against market expectations of 4.1%. Goods inflation in the UK fell 0.3% to 0.8%, while services inflation was down 0.1% at 6.0%.

 

Producer Price Inflation input prices fell by 2.5% in the 12 months to March 2024, against a revised fall of 2.2% in the year to February 2023. The corresponding output (factory gate) figures saw a 0.6% annual rise against a previous 0.4% rise. The ONS notes that ‘Input and output price levels have been relatively stable since mid-2022 but remain substantially higher than their 2021 levels.’  

 

Comment 

 

These figures suggest that the Bank of England may be reluctant to cut rates in June, contrary to what some commentators had been expecting. The Bank will also be concerned by Tuesday’s data showing annual growth in employees' average regular earnings (excluding bonuses) being up 6.0% in December 2023 to February 2024, (total earnings including bonuses 5.6%).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PENSIONS

 

HMRC Pension Scheme Newsletter 158 – April 2024

(AF8, FA2, JO5, RO4, AF7)

 

Pension scheme newsletter 158 covers the following:

 

• lifetime allowance (LTA) abolition
• public service pensions remedy (McCloud)— impact of lifetime allowance abolition
• pension remedies for MPs, MSs and members of the Northern Ireland Legislative Assembly — tax treatment of annual allowance and lifetime allowance

 

Areas of particular interest

 

Lifetime Allowance

 

The newsletter highlights a number of areas where further technical changes to regulations are required for the abolition to work as intended.   Once again, these will be essential reading for scheme administrators and those who advise in this area. 

 

They are few areas where HMRC have suggested clients may want to delay taking action until the legislation is corrected as intended.  These include:

 

Scheme specific lump sum protection

 

HMRC are aware that the current formula in the legislation to calculate the entitlement is incorrect and will amend it.  They suggest that those with scheme specific lump sum protection (ie protected tax free cash) may wish to delay taking benefits until the formula is amended.

 

Overseas Transfers

 

Where an individual transfers funds to an overseas scheme their Overseas Transfer Allowance is reduced by 100% of their LTA previously used.   This means that any benefits that are currently in drawdown will effectively be double counted as they have previously been tested.  Again, HMRC will amend the legislation but those impacted may want to delay their transfers.

 

Enhanced Protection and transfers

 

HMRC will bring forward legislation to allow those with Enhanced Protection to transfer their pension savings to a new provider and carry over the benefit of their protection.  Currently this is not possible as their permitted maximums for lump sums and lump sum and death benefit payments operate on a per arrangement basis.  Anyone affected should consider delaying a transfer until the new rules are introduced.

 

The newsletter also highlights other minor amendments to the Transitional Tax-Free Amount certificate rules and process and to the scheme reporting requirements.   These all aim to make sure the rules operate as intended and that schemes and individuals will be able to record and be aware of the entitlements.

 

Public Service pensions remedy and the impact of the lifetime allowance abolition

 

The newsletter gives a great deal of information on this, however, the essential point is that as the remedy applies retrospectively so will any lifetime allowance charges.  Where a client has already taken benefits before the remedy and then elects to take them on the remedy basis their LTA used will need to recalculated and benefits tested based on the LTA at the time.  LTA charges will apply in the same way as they would have done had the revised benefits been taken in the relevant year.

 

Following the remedy some members who would not have been able to apply for Individual Protection 2016 may now be able to do so.  Their values will be based on the remedy positions.

 

Those subject to the remedy will have an extended deadline to apply for both Fixed Protection 16 and Individual Protection 16.  The deadline will be 5 April 2027 rather than the 5 April 2025 that applies generally.

 

 

Pensions dashboards: guidance on connection: the staged timetable

(AF8, FA2, JO5, RO4)

 

The Department for Work & Pensions (DWP) has published new guidance setting out its “required” time scales for pension schemes to connect up their member’s data available to the Pension Dashboard (PD) “ecosystem”.

 

Large schemes, including SIPPs/PPPs with 5,000 or more members and Master Trusts with memberships of 20,000 or more, are being asked to connect by 30 April 2025. However, this is not a statutory requirement to do so by this date and the DWP would “encourage trustees or managers and pension scheme providers to follow the dates in this guidance unless there are exceptional circumstances which prevent them from doing so”. One can expect either the Financial Conduct Authority (FCA) or The Pensions Regulator (TPR), as appropriate, to take an interest in the excuses made by schemes. However, all pension schemes have to connect to the PD ecosystem by the final connection date of 31 October 2026.

 

However, neither of those dates mean individuals will be able to view their details on a PD as the DWP has yet to confirm a launch date for PDs. It will only set the launch date of the PDs once it is sure enough pension schemes have connected to the PD, and an individual has a very high chance of seeing all their pensions when they access their PD. If the ‘coverage’ of pension records isn’t high enough, the danger is people will lose confidence in the pensions dashboards if they request details but aren’t shown all their pensions.

 

Additionally, individual PDs also must ensure they are working efficiently, are easy to work, and that the information given is simple to understand.

 

In a written ministerial statement (UIN HCWS381), Pensions Minister Paul Maynard said that: “The Government is absolutely committed to delivering pensions dashboards safely and securely to the public at the earliest opportunity. The publication of the connection timetable marks a significant milestone towards launching pensions dashboards, and takes us closer to introducing a service that has the potential to transform how individuals plan for retirement.”

 

The Pensions Dashboard Programme (PDP) has scheduled a one-hour webinar on 17 April 2024 at 15:00 Pensions to provide information on the publication of the DWP guidance and a PDP progress update.

 

Hymans Robertson Client Manager, Third Party Administration Karl Lidgley agreed that the guidance provides clarity for the industry to move forward saying in their Press Release that: “It’s great to see the final dashboard connection guidance has now been issued by DWP, allowing the industry to move forward with some certainty into a delivery phase. There are still a few pieces in the jigsaw puzzle, but schemes now know when they are required to connect. We also expect PDP to issue the final data standards shortly, which will allow finalisation of builds into the required systems.”

 

 

 

Relevant Earnings for the self-employed

(AF8, FA2, JO5, RO4)

 

It has always been difficult for advisers to estimate the level of profits a self-employed individual will make in a tax-year when trying to maximise pension contributions. Tax-relief is of course capped by 100% of “relevant UK Earnings” (RUKEs). However, the way in which taxable profits are calculated is changing from the 2024/24 tax-year. From 6 April 2023, the new tax year basis applied which means profits have to be reported up to the tax year end, even if the accounting year ends at a different time, in self assessment tax returns. If an accounting year end is not on or between 31 March to 5 April, profits may need to be apportioned between accounting periods.

 

HMRC has created a calculator to work out transition profit under basis period reporting rules for sole traders and the self employed, but not for partnerships. Before working out transition profit using the calculator, the overlap relief figure has to be obtained.

 

Therefore, it is more important than ever for advisers to ask a client’s accountant for an estimate of profits for a self-employed client rather than trying to work out a figure themselves.

 

 

ABI: Understanding the impact of 'pot for life' proposals

(AF8, FA2, JO5, RO4)

 

WPI Economics has published a report for the ABI, entitled Understanding the impact of 'pot for life' proposals, which seeks to bring together a range of evidence to set out what the proposals to introduce member choice and stapling in workplace pensions could mean in practice. In particular, the report draws on a survey of 1,002 employers, finding that 77% were confident that their current scheme is managing their employees' pensions effectively, whilst 63% were worried that the proposed reforms will increase their payroll provider costs. In addition, the survey found that 62% of employers were worried that the reforms would lead to their employees getting worse pension outcomes, whilst 61% recognised the potential of the reforms to give employees the freedom to choose a pension that works for them.

 

Yvonne Braun, ABI Director of Long-term Savings Policy, commented that: “Automatic enrolment through the workplace was primarily set up to help those who were not saving into a pension, many of whom were lower paid people, and we must not reverse its success. As this evidence shows, member choice would deliver few benefits, but risk throwing away the gains from auto-enrolment. Pensions dashboards will bring key improvements in data quality which could help to make more efficient, cheaper pension transfers a universal reality. It is important that this work is completed, and the impact understood, before any further reforms are added to the mix.”

 

 

TPR: Global settlement sees £3.5 million returned to pension scheme, as TPR demonstrates its use of powers

 

The Pensions Regulator (TPR) has published a Regulatory Intervention Report which sets out how a settlement was reached after the Regulator issued a warning notice seeking financial support directions against six target companies in relation to the Newburgh Engineering Co Ltd Pension and Assurance Scheme. The report details how TPR's action was based on evidence that assets had been transferred out of a scheme employer, Newburgh Engineering Co Ltd (NEC), to its wider corporate group as part of a series of corporate restructuring. This placed assets out of reach of NEC's creditors, including the Newburgh Engineering Co Ltd Pension and Assurance Scheme. NEC went into administration in October 2018 and was unable to support the DB pension scheme. Using its anti-avoidance functions against third parties, TPR facilitated a multi-stakeholder global settlement resulting in £3.52m being paid to the pension scheme, which has now transferred to the PPF.

 

 

TPR Interim Executive Director of Frontline Regulation Mel Charles said: “Our actions in this case send a clear message that TPR will investigate corporate transactions and restructurings which affect schemes of all sizes. Where proper mitigations have not been considered for pension schemes, our anti-avoidance powers may be engaged. We will consider reasonable settlement offers which help us to meet our statutory objectives of acting in the interests of scheme members and the PPF, while saving considerable costs and resource for all parties involved.”