European Court gives opinion on compulsory retirement ages

A landmark legal challenge being pursued by retirement organisation Heyday in the European Court may be affected by the opinion of a senior legal adviser at the European Court in a similar Spanish case.

Heyday’s case challenges the right of employers to compel workers to retire at 65, but Advocate- General Jan Mazak has said in a preliminary ruling in the case of Felix Palacios de la Villa v. Cortefiel Servicios SA that he does not believe national laws allowing for a compulsory retirement age within collective agreements fall within the scope of the EU’s equal treatment directive. The Advocate-General added that even if they did, in his opinion they would not be unlawful as they serve a ‘legitimate public interest aim’. The Advocate General’s opinion is not binding on the ECJ but it is unusual if it is not followed in the eventual judgement of the court.

Draft regulations on standard lifetime allowance and annual allowance

The Government has published draft regulations which set the levels of standard lifetime allowance and annual allowance for the forthcoming tax years 2007/08 to 2010/11.

As expected, the standard lifetime allowance (the amount of an individual’s pension savings in registered pension schemes which can benefit from tax relief) for the tax year 2007/08 will be £1,600,000. This allowance increases to £1,650,000 for the 2008/09 tax year. The annual allowance (the total annual contributions that an individual can pay into registered pension schemes) will be £225,000 for 2007/08, rising to £235,000 for 2008/09.

To view the draft Order go to:  http://www.hmrc.gov.uk/pensionschemes/lifetimeannual-allow07.pdf 

The Pensions Regulator publishes internal controls guidance

The Pensions Regulator has published guidance which is designed to help trustees to comply with the Pensions Act 2004 requirement to put internal controls in place. The guidance complements the Regulator’s code of practice on internal controls and expands on the concept discussed in the code that the establishment of adequate internal controls depends upon a robust risk-management approach. The guidance also provides an example of how a riskmanagement process may work in practice.

To view the guidance go to: http://www.thepensionsregulator.gov.uk/guidance/internalControls/index.aspx

Memorandum of Understanding between DWP, PPF and Pensions Regulator

On 15 February, the Department for Work and Pensions published a trilateral Memorandum of Understanding between the DWP, the Pensions Regulator and the Pension Protection Fund. The memorandum sets out the division of responsibilities between the three bodies so that each has a clearly defined role in pension regulation and protection.

At the heart of the memorandum are the four guiding principles of accountability, transparency, the regular and appropriate exchange of information and the avoidance of duplication. The memorandum is implemented with the intention of enabling the three bodies to work together efficiently and effectively towards the common objective of pension security. It includes a provision for the memorandum to be reviewed annually or when there is a change in policy or legislation.

To read the memorandum in full visit: http://www.dwp.gov.uk/publications/dwp/2007/ppf/memo-2007.pdf

Fund Management module of Trustee toolkit released by the Pensions Regulator

The Pensions Regulator has released the latest module of its online training programme for trustees. The ‘Trustee toolkit’, which is free for users, is designed to help trustees meet the requirements for trustee knowledge and understanding, introduced by the Pensions Act 2004. The focus of the latest module is ‘Fund Management’. This module offers trustees advice on the process of selecting a fund manager and reviewing their performance, a consideration of the various types of fund management available as well as corporate governance issues such as ethical investment.

To log on to the trustee toolkit visit: http://www.trusteetoolkit.com/arena/index.cfm  

HMRC guidance on employer contributions and tax

HMRC has updated the relevant section of its Business Income Manual (BIM) dealing with when an employer’s contribution to a registered pension scheme will be allowable as a deduction in computing the employer’s trading profits for tax purposes.

The guidance applies to accounting periods on or after 6 April 2006. It confirms that, in accordance with the general rules on deductibility of expenses of a trade or profession, employer contributions to a registered pension scheme will be deductible provided they are paid ‘wholly and exclusively’ for the purposes of the trade. A pension payment by an employer will normally pass this test, although the guidance looks at the ‘relatively rare’ circumstances in which there is a non-trade purpose for the employer’s decision to make the contributions. Amongst other areas, it also looks at payments made pursuant to section 75 of the Pensions Act 1995 (debt on the employer payments), payments made by third parties and contributions linked to salary sacrifice arrangements.

To read the guidance go to: http://www.hmrc.gov.uk/manuals/bimmanual/updates/bimupdate310107.htm

HMRC Tax Simplification Newsletter 24

Since our January Update, HMRC has published Tax Simplification Newsletter 24. Amongst other things, this edition refers to HMRC’s recent announcement on the tax and National Insurance position of employer cash inducement payments to pension scheme members, gives details of various new pension simplification processes which will come into effect on 5 April 2007 (when pension simplification celebrates its first full year in operation), and a guidance note detailing how members of US pension schemes who come to work in the UK can claim relief on their contributions under the UK/USA double taxation convention.

The newsletter is available at: http://www.hmrc.gov.uk/pensionschemes/newsletter24.htm  

HMRC publishes errors guidance

HMRC has published guidance on whether payments made into or out of a registered pension scheme in ‘genuine error’ amount to authorised or unauthorised payments for Finance Act 2004 purposes. HMRC acknowledges that payment errors will inevitably occur in relation to the administration of a scheme, its banking processes and the receipt of contributions from members. The guidance gives examples of what HMRC means by a ‘genuine error’ and outlines the circumstances in which such payments will not amount to an unauthorised payment. For example, an inadvertent payment made by a scheme in genuine error, which was spotted and rectified as soon as possible, will not be an unauthorised payment and there will be no duty to report the payment to HMRC. However, once such an error has been spotted, if no action is taken to recover the payment, or if recovery fails and the trustees decide to write off the relevant amount, the payment would be regarded as an unauthorised payment for tax purposes.

To view the full guidance go to http://www.hmrc.gov.uk/pensionschemes/errors-guidance.pdf