BeeHive > BeeLines > The A-Day duties of pension scheme administrators
The A-Day duties of pension scheme administrators
It won’t come as any surprise to anyone reading this that the new A-Day pension tax regime coming in on 6th April this year will be introducing retrospective tax laws. Under the new tax regime there will be a maximum amount of lifetime pension funding that will be allowed for anyone and people whose pension savings exceed that maximum pot will be taxed at a new tax rate of 55% on any excess. The retrospective nature of these new tax laws means that some people who have legitimately built up large pension pots under the existing legislation could find they are taxed on what they’ve already got if they’re not careful, although those more aware than others may be able to protect what they have if they take timely action. If that did come as a surprise to you, by the way, I’m sorry about that. I know it can be a bit of a shock to find out things like this late in the day, particularly with April only being nine weeks or so away.
The maximum amount we’re able to save includes the value of all of our various bits and pieces of pension we’ve left behind us as we’ve stumbled through a lifetime of employment as well as the value of any private pensions that we’ve already got being paid to us on the dreaded day. It’s not possible to avoid this 55% tax hit by keeping all your pensions in little bits here and there and hoping that the pension scheme administrators don’t notice when you come to retire. It won’t work that way I’m afraid.
That’s lead me to thinking about just exactly how this will all fit in on a day to day basis in real life after A-Day and this BeeLine is just a little snippet really to keep you up to date with the trivial realities of it all.
The responsibilities for policing all this won’t just rely on us as individuals, something I’m sure you won’t find surprising, but are laid on pension scheme administrators too. When administrators come to pay out retirement benefits from their schemes in the future they will have a number of new responsibilities to contend with. Firstly they will have to work out whether a chargeable amount arises on any benefit that is being paid to the pension scheme member. Secondly it will be up to the administrator to account for the tax (which is called the Lifetime Allowance Charge by the way) to Her Majesty’s Revenue & Customs. And, thirdly, they will have to give a statement to every person who gets a retirement benefit showing the amount of the Lifetime Allowance (their maximum pension pot) that has been used up by the taking of the particular benefits and, if tax is due, the Lifetime Allowance Charge that they’re in for on this amount. (This all has to be done within three months of retirement, which should add a little zest to the whole thing).
Obviously to do this job properly scheme administrators will have to have access to details of their scheme members’ pension details, particularly where they are entitled to protection from the new tax or even enhanced allowances. To add a bit of seriousness to the urgency of all this, scheme administrators will be held jointly liable with scheme members for any Lifetime Allowance Charges due, unless they can demonstrate that they acted in good faith on the basis of dodgy information provided by the scheme member. Administrators will obviously be laying this on thick with members when they get them to provide them with this important information I should think.
So, if you’re in a scheme and your scheme administrator starts asking you for details of a personal financial nature don’t think they’re being nosey or anything. It’s just that they’ll need to know your business if they’re going to walk the line.
31 January 2006
This document is based on Scottish Life's current understanding of the Finance Act 2004.This may be affected by future changes in legislation and the individual circumstances of the investor. Independent advice must be sought regarding the effect on a specific individual or scheme.