Newsletter 152 — July 2023
Published 20 July 2023
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1. Legislation Day (L-Day) 2023
At Legislation Day 2023, the government published draft legislation in connection with the following pension measures.
1.1 Relief at source
The government announced at Autumn Budget and Spending Review 2021 that it would digitise the relief at source (RAS) pension tax system, which will improve the experience for pension scheme administrators and reduce errors.
The measure will:
- allow HMRC to provide the correct legislative framework for new RAS regulations
- include non-compliance with the new RAS regulations as grounds for de-registration
- make provision for different relevant rates in regulations
New regulations will be needed to cover how you, as pension scheme administrators, should claim tax relief on eligible contributions made to registered pension schemes from 6 April 2025. These will be published for consultation in due course and will set out how you can claim relief due to your members under section 192.
The amendments made by this revision will have effect on and after 6 April 2025. These changes will not impact on who is eligible for tax relief, or on the principle of RAS whereby relief at ‘the relevant rate’ can be deducted before the contribution is made.
Abolition of the lifetime allowance (LTA)
At Spring Budget 2023 the government announced that it would abolish the LTA. Finance (No.2) Act removed the LTA charge and provided for some technical changes. This measure provides for further changes to abolish the LTA and to clarify the tax treatment of pension savings.
The changes include, but are not limited to:
- the introduction of a lump sum allowance of £268,275 and a lump sum and death benefit allowance of £1,073,100
- the taxation of lump sums and lump sum death benefits
- the position of individuals with LTA protections, lump sum protections or LTA enhancement factors
- the removal of most benefit crystallisation events (BCE)
- confirmation of the final date for applications for Fixed Protection 2016 and Individual Protection 2016
HMRC would like to thank all members of the LTA working group for their help and support. We would welcome responses from all stakeholders on the areas we have discussed including but not limited to the approach to:
- crystallised lump sum death benefits
- excess pension commencement lump sums, designed to accommodate the absence of the lifetime allowance excess lump sum and specifically whether restrictions may be necessary to prevent any unforeseen impact — it is not the government’s intention to significantly expand pension freedoms
- small lump sums
- winding up lump sums
- trivial commutation lump sum
The draft legislation provides several places where HMRC have regulation making powers to specify how scheme benefits are to be valued or similar. Our intention here is not to change the approach that schemes currently take to valuing benefits. We would welcome views from schemes on where in the legislation they consider this detail would be best placed.
BCE5C and BCE5D, international and transitional elements are not included in the legislation published at L-Day, however respondents to the consultation are welcome to provide thoughts on these areas.
2. Relief at source (RAS) — annual return of information for the tax year 2022 to 2023
The deadline for submitting your annual return of information and APSS590 declaration for 2022 to 2023 to HMRC has passed. However, there are still returns outstanding from scheme administrators who have submitted interim repayment claims in 2023 to 2024.
If a 2022 to 2023 annual return of information was due for your scheme and this is still outstanding, any subsequent interim repayments will be withheld until we receive both the outstanding return and APSS590 declaration.
We want to remind pension scheme administrators that it’s important to use the right naming convention when submitting an annual return of information for 2022 to 2023. Using the wrong references on either the file name or within the annual return itself will mean our systems will reject your submission and you’ll have to resubmit the return.
You can find details of how you should name your files in:
3. Pension flexibility statistics
HMRC can now give more information on the number of tax repayment claim forms processed for pension flexibility payments.
From 1 April 2023 to 30 June 2023, we processed:
- P55 — 11,232 forms
- P53Z — 2,987 forms
- P50Z — 1,620 forms
Total value repaid: £56,243,842
The tax repayment figures for the period 1 July 2023 to 30 September 2023 will be published in Pensions schemes newsletter ― October 2023.
4. Qualifying recognised overseas pension schemes transfer statistics
The number of transfers in to qualified recognised overseas pension schemes has fallen to 3,250 in 2022 to 2023, from 3,900 in 2021 to 2022.
The total value of these transfers was £680m up from £517m in the previous year.
| Year | Number of transfers | Total value of transfers |
|---|---|---|
| 2006 to 2007 | 2,500 | £120,000,000 |
| 2007 to 2008 | 5,700 | £350,000,000 |
| 2008 to 2009 | 6,100 | £360,000,000 |
| 2009 to 2010 | 6,700 | £460,000,000 |
| 2010 to 2011 | 12,800 | £1,360,000,000 |
| 2011 to 2012 | 16,400 | £1,040,000,000 |
| 2012 to 2013 | 13,400 | £1,000,000,000 |
| 2013 to 2014 | 11,300 | £860,000,000 |
| 2014 to 2015 | 20,100 | £1,760,00,000 |
| 2015 to 2016 | 13,700 | £1,500,000,000 |
| 2016 to 2017 | 9,700 | £1,220,000,000 |
| 2017 to 2018 | 4,700 | £740,000,000 |
| 2018 to 2019 | 5,000 | £640,000,000 |
| 2019 to 2020 | 4,400 | £550,000,000 |
| 2020 to 2021 | 3,000 | £416,000,000 |
| 2021 to 2022 | 3,900 | £517,000,000 |
| 2022 to 2023 | 3,300 | £680,000,000 |
The figures for 2023 to 2024 will be published in July 2024.
5. Purpose of a registered pension scheme
We’d like to remind pension scheme administrators that pension schemes must be established and maintained wholly or mainly for the purpose of making payments falling within section 164(1)(a) or (b) (authorised payments of pensions and lump sums).
Where a scheme does not allow the payment of benefits or has terms and conditions that suggest the scheme will not pay out benefits on normal retirement (for example if a customer wants to take a pension then they have to transfer their funds to another registered pension scheme first), it is unlikely to be satisfying the wholly or mainly test.
HMRC will consider de-registration of pension schemes that do not meet this requirement.