The forms for Enhanced and Primary Protection
OK, let’s start this one by explaining that the Inland Revenue no longer exists. Unfortunately that’s not the good news we’ve all been waiting for, merely to let you know that it has been lumped together with what was Customs and Excise to form the new and whizzy government department called Her Majesty’s Revenue and Customs, or HMRC for short. This happened some time ago and I was going to keep referring to them as the Inland Revenue, but the only way to keep track of what they’re up to is to put HMRC into my internet search engines, so I’ve decided instead to just go along with it all and start getting used to the HMRC name tag.
The first thing I found on the Wibbly-Wobbly-Web when I tried out HMRC on Google was something called the Pensions Tax Simplification Newsletter No 1. It is a huge document that claims to have been written “with all our customers in mind”. HMRC defines its customers as all individuals who want to find out about pensions, employers who are involved in pensions, and everyone in the financial services industry, including financial advisers. So, that includes all of us then.
I have to say, having waded through countless pages of this stuff that I suspect it will probably not be that easy for Joe and Josephine Public to take on board – it will probably freak them out, in fact. But for advisers intending to deal with pensions in the post A-Day world, it looks to me to be required reading. I would say it is the nearest thing we’re going to get to a rule book on the new pensions tax environment. Having said that, I will over the coming weeks and months do my best to translate as much of it as I can into English for you, and much of it will already be known by avid BeeHive readers, but I do think all financial advisers should go to the site and download the whole thing to keep as a reference work. You can do that by simply clicking on the following link:
This so-called newsletter, along with its Technical Pages (which are very technical) are something of a work in progress. We are promised regular updates which will be aimed at keeping us “informed on what you need to know in the run up to the launch of pensions tax simplification”. It is interesting that the HMRC mentions the run-up to A-Day in that description, because many of us are as keen as mustard to find out just how we can translate all of the theory that keeps getting thrown at us into practice. I was excited, therefore, to find that this first newsletter has a section on the forms people will need to complete if they want to apply for Primary or Enhanced Protection (or both, even!) These protections, as I’m sure you’ll know by now, are available to people who may already have more in their pension pots than the Government will ever allow people in the future to accumulate without suffering tax penalties. People who overdo things in future will be taxed at up to 55% on any excess pension savings over the so-called Lifetime Allowance (which starts off at £1.5 million in 2006). People who have already overdone things before A-Day will be allowed to get away with it, though, but only if they apply for ‘protection’ in good time. To do that they’ve got to fill in forms and make an application to be spared the 55% tax. Obviously, this is something we really do need to know all about pretty sharpish as anyone applying for Enhanced Protection must cease to be an active member of a registered pension scheme before A-Day.
To save you fighting your way through the whole thing I’ve pasted below a link that will take you straight to this section of the newsletter:
Unfortunately, when you get there, you’ll probably be just as disappointed as I was, because the real forms aren’t there yet, so far all we’ve got are drafts. This is because the forms will need to be changed to take account of the provisions of the 2005 Finance Act, but what is here is very useful I think. When you get to the page by following the above link you will need to click on the fifth bullet-pointed link in the document which is headed-up as ‘Protection of Existing Rights’. This will take you to eight pages of draft notes aimed at helping people complete the form, as well as a draft copy of the form itself. These are important details that I think all financial advisers should become familiar with.
That’s probably enough for this BeeLine, but there’s a lot going down at the moment with new stuff coming out from the Government types almost every day – I think we’re going to see a whole pile of the detailed stuff coming out throughout the summer. That’s good, because I was wondering what I was going to do with my time now that the weather’s so good…..
13 July 2005
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.
Any research and analysis included has been provided by us for our own purposes and the results of it are being made available only incidentally.