Despite recent press reports predicting further delay, the Registered Pension Schemes (Authorised Payments) Regulations 2009 were laid before the House of Commons on 8 May 2009 and are due to come into force on 1 June 2009.
Many trustees and employers have been eagerly following the progress of these regulations, as they are aimed at easing the administrative burden on pension schemes by extending the list of payments that a scheme can make without those payments being classed as “unauthorised payments” and attracting associated tax charges.
Of particular interest are the provisions concerning the commutation of certain small pension scheme entitlements into lump sums. As the Explanatory Note to the Regulations acknowledges, relaxations to the tax treatment of such lump sums will help prevent schemes “having to pay pensions that would be uneconomic for them to administer and of little real value to the member”. However, schemes will have a little longer to wait before taking advantage of these new commutation rules, as they will only have effect in relation to payments made on or after 1 December 2009.
The Regulations also set out a number of other instances where payment of a lump sum or pension will no longer be classed as an “unauthorised payment”, for example, payments made in error and payments of arrears of pension due after the death of a member. In contrast to the provisions concerning the commutation of small pension scheme entitlements, these rules are stated to have retrospective effect, applying to payments made on or after 6 April 2006.