The Finance Bill has now completed its committee stage and is awaiting Report Stage (discussion in the whole House). All the pensions provisions in Schedules 16–18 were agreed, including the provisions on pension input periods referred to in last month’s Pensions Update.
Amendments seeking to increase the lifetime trivial commutation threshold from £18,000 to £21,500 were rejected after a vote. However, Mark Hoban, Financial Secretary to the Treasury, stated that the limit will be kept under review.
HMRC’s Pension Schemes Newsletter 47 contains an update on the Finance Bill, including examples of how the DB “expected pension” is to be calculated for annual allowance purposes and confirmation that the regulations on the detail of the measures in the Bill will become effective 21 days after the new Finance Act has effect.
“Scheme pays” DWP consultation permitting surrender
The DWP has issued draft regulations which provide 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 Bill 2011, the scheme meets an annual allowance charge on a member’s behalf in return for a consequential adjustment of the member’s pension benefits.
By way of reminder, from 2011/12 schemes have to 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. They may, but cannot be compelled to, offer the facility on request to individuals with an AA tax charge of more than £2,000 who have not exceeded the AA in any one scheme. For further background, see the March edition of Pensions Update.
The very short consultation period, which has already ended, was stated to be necessary because the provisions have to be in force as soon as possible after the Finance Bill becomes an Act (expected to be in July 2011) to enable members retiring on or after 6 April 2011 to make the necessary election.