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General Pensions News
Lifetime Allowance and pension death payments Published: 13 April 2023 Emailed: 19 April 2023
It has been reported that HM Revenue and Customs (HMRC) will no longer be making changes on dealing with death benefits following the removal of the Lifetime Allowance (LTA).
As announced in the Spring Budget 2023, the LTA will be scrapped from April 2023 and abolished entirely in 2024. This meant that lump sum payments from pensions on death that would have been subject to an LTA excess charge, will instead be liable for income tax at the receiver’s marginal rate as of 6 April 2023. The responsibility was on the beneficiaries or solicitors, also known as the legal personal representative (LPR) to determine the apportionment of a tax charge to the pension provider. The provider was then required to deduct the tax from the excess above the LTA prior to making the payment. However, previously a pension provider would pay out pension death benefits without accounting for the LTA tax charge. Delegates from the commerce raised concerns around the new treatment for the taxation of death benefits. Experts from the industry believe these changes could have caused obstacles and delays in pension death benefit payments. As the pension scheme will be required to wait for the LPR to confirm the LTA position before funds can be released.
An HMRC spokesperson said:
“We have listened to the concerns expressed by pension providers. Having spoken with the industry, we have decided to maintain the current process for dealing with death benefits.
This will continue until we have worked through the longer-term position for the full abolition of the lifetime allowance from April 6, 2024.”
HMRC will continue to provide further information in LTA specific pension scheme newsletters.
The ‘Lifetime allowance guidance newsletter — March 2023’ can be accessed here.
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TPR authorises the UK’s first CDC pension scheme Published: 14 April 2023 Emailed: 19 April 2023
The Pensions Regulator (TPR) has assessed and authorised the UK’s first collective defined contribution (CDC) pension scheme.
CDC schemes provide a new alternative to traditional defined benefit (DB) and defined contribution (DC) pension schemes. In CDC schemes, member and employer contributions are pooled in a collective fund from which an aspired to pension income for life is drawn. Currently, CDC schemes can be set up by single employers, for that employer only, or for employers in the same group of companies.
TPR states:
‘‘ The authorisation is a milestone for TPR and shows how the regulator is pursuing its strategy to embrace innovation to help meet pension savers’ needs.
The pooling of longevity and investment risks makes CDC schemes more resilient to market shocks. In addition, unlike DB schemes, the pension benefits are not guaranteed in CDC schemes, so they provide employers with predictable costs. External modelling suggests that they can also provide, on average, better returns for members than traditional DC schemes.’’
The following pension schemes have been granted CDC authorisation:
• Royal Mail Collective Pension Plan (RMCPP)
cipp.org.uk
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