Finance Bill update
Those of you who struggled through my summary earlier this week of the long process involved as the 2004 Pensions Act gradually emerges into the light will be pleased to know that things are far more clear cut with the Finance Act. In fact, the last stage should go through today (22nd July) and I would expect we will see the finished article, the Finance Act 2004 no less, in the next few days.
This Finance Act, as you will have heard me say before, is very important in that it will be introducing all the retrospective legislation on pensions taxation that will come into force on A-Day, the date normal people still refer to as 6th April 2006. The legislation will replace all of the existing pensions tax legislation currently incorporated in ICTA 88.
The Finance Bill this year was the longest in history and over a third of it related to the pension changes. It has also been subject to a seemingly endless stream of amendments as it has been moving quickly through the parliamentary process and is certainly one of the most amended Bills Iíve ever tried to keep track of. It will also be backed up by regulations (already 15 sets of draft regulations have been issued) but hopefully not as many as before.
It has all been mercifully quick, though, particularly when you compare it to the oh so slow progress of the Pensions Bill. The first version of the Finance Bill (Version 1, believe it or not) was published on the 8th of April 2004. Not that long ago really. Version 2 was published on the 24th of June following Standing Committee Stage, and it's already been through Report Stage and 3rd Reading in the House of Commons.
The Bill had it's first reading in the Lords just a week or so ago on 12th July and the Second Reading and remaining stages were completed on Tuesday 20th of July. That, then, is more or less it. It should receive Royal Assent today and, bingo, weíll finally have the definitive document that will describe precisely what the tax laws governing pensions will be following A-Day. Thatís pretty important, I think, because it should put an end to all the speculation of whatís what as far as the detailed implications of the changes will or wonít mean.
I say Ďshouldí there because Iím well aware that when we finally get our grubby hands on a copy of the Finance Act in the next week or so, it will almost certainly be as difficult to read as the Finance Bill was. That, if you remember, was an absolute doozy! Our first job, once we have it, will be to translate it into English and, once weíve managed to do that, Iíll put that into Plain English and get it out as a BeeLine asap, hopefully in the early part of August.
I doubt that there will be any changes made to the pensions tax laws that come in on A-Day in next yearís Finance Act. The Government guys working on this stuff have said they will do it all in one go with Finance Act 2004, and there are loads of reasons to suspect they mean that as the retrospective nature of these changes will take some time to bed in.
The original reason given for postponing A-Day until 2006 was to enable time for proper financial advice to be given to individuals and companies directly affected by the changes. I reckon thatís every company in the UK with an existing pension scheme, every individual who has previously been advised on pensions issues, and most of the middle to senior management of UK plc who are members of occupational pension schemes.
So, plenty to be getting on with to keep us out of trouble for the next twenty months or so. Indeed, itís difficult to imagine how so many schemes and individuals are going to be able to rearrange their pension affairs in so short a time given the alarmingly low number of qualified pension advisers around who are able to help them. Further changes made at the halfway stage by next yearís Finance Act would be pretty unhelpful in that respect.....
22 July 2004
This information is based on our current understanding of the current version of the Finance Bill 2004 (published 24 June 2004). This is draft legislation and may be subject to change.