Regulations are now in force providing that the prohibition on surrender of pension benefits in section 91 of the Pensions Act 1995 will not apply where, under the “scheme pays” provisions of the Finance Act 2011, the scheme meets an annual allowance charge on a member’s behalf in return for a consequential adjustment of his pension benefits.

By way of reminder, from 2011/12 schemes must offer the “scheme pays” facility where an individual who has an AA charge above £2,000 and has exceeded the AA in that scheme elects for the full liability to be met from his pension benefit. Where an individual has an aggregate AA charge above £2,000 but has not exceeded the AA in any one scheme, any of those schemes may offer the facility to that individual on request but cannot be compelled to do so.

The DWP has also published the Government response to the May 2011 consultation on the draft regulations (see Pensions Update, June 2011). Only minor clarificatory changes have been made in the final regulations.

Two respondents suggested that equivalent provision should be made for insurers to pay the AA charge for members of contract-based schemes, and the DWP states that HMRC is considering this.