Registered pension schemes are subject to a number of statutory provisions:
- HMRC have rights and information powers relating to registration and deregistration of pension schemes but must register a scheme unless inaccurate information or a false statement is provided. In limited circumstances, HMRC can deregister a scheme.
- Each scheme needs to appoint a scheme administrator but the High Court can make an independent appointment if this is in the interests of the scheme members. The new administrator may become liable for tax liabilities on events occurring prior to their appointment. In certain circumstances liabilities can pass to the sponsoring employer, scheme manager or scheme member e.g. if the administrator becomes insolvent.
- Statutory restitution powers are provided to require a payment to be made to a scheme. The scheme member or sponsoring employer may be entitled to relief if earlier unauthorised payment charges have been suffered.
- Surrenders of pension scheme rights are subject to an unauthorised payment charge. This is subject to two exceptions: where rights are given up in favour of a dependent’s increased pension or they are given up to fund an authorised surplus payment to the employer sponsoring the scheme. In the second case an authorised surplus charge arises instead.
The following changes are being introduced:
- HMRC powers are being widened so that they can refuse registration or require deregistration where they believe the scheme administrator is not a fit and proper person, or the scheme is being provided other than to provide pension benefits. A new penalty of £3,000 is being introduced for false information provided during the registration process.
- Where an independent administrator is appointed they will not be liable for tax liabilities arising prior to their appointment. Instead, the liability will fall on the previous administrator.
- Where repayment to the pension scheme is required due to misuse or misappropriation of funds, the scheme member or administrator will be entitled to relief on an earlier unauthorised payment. However no tax relief will be available on the repayment as a contribution to the scheme.
- The exception for surrenders relating to a dependent’s increased pension will only apply if the dependent’s new rights are provided by the same scheme. Surrenders to a sponsoring employer will however no longer benefit from an exemption and so will be subject to an unauthorised payment charge instead of an authorised surplus charge.
All changes take effect from 20 March 2014, apart from the fit and proper test and the rules following regulatory interventions to appoint independent trustees and repayments for misuse or misappropriation of funds, which take effect from 1 September 2014.
These changes will affect both scheme administrators and members, particularly members entering schemes to obtain access to their pensions before reaching retirement.