The Chancellor of the Exchequer released his Pre-Budget Report on 9 October, and it contained several provisions relating to pension schemes. The report includes changes to the State Second Pension (S2P) and contracting out, and confirms that legislation is to be introduced under the Finance Bill 2008 to ensure that the spreading of large pension contributions by employers cannot be avoided by routing them through a new company. It also makes various technical changes to the pensions aspects of the Finance Act 2004.
In relation to the inheritance of tax-relieved pension savings, Finance Bill 2008 will contain provisions to ensure that scheme pensions and lifetime annuities are used to provide an income for life and not as a means of diverting tax-relieved pension savings into inheritance. It does this by imposing unauthorised payments charges and, where appropriate, IHT charges. This makes the treatment of scheme pensions and lifetime annuities consistent with the treatment of alternatively secured pensions (ASPs).
HMRC publications and notes relating to the Pre-Budget report can be found at: http://www.hmrc.gov.uk/pbr2007/index.htm.