SEPTEMBER 2011 NEWSLETTER: HMRC Updates and reminders

Contributed by MW Pensions. [www.mwpensions.co.uk]

Fixed Protection
HMRC have now issued the form that is to be used to obtain Fixed Protection. It is applicable to those who believe they may have or accrue total pension assets valued between £1.5M and £1.8M. The form must be received by HMRC on or before 5th April 2012. The Form itself is APSS227 and can be found at:

http://www.hmrc.gov.uk/pensionschemes/apss227.pdf

HMRC have also issued guidance on this form, and this is at:

http://www.hmrc.gov.uk/pensionschemes/apss227-notes.pdf

IFAs and other advisers are referred to the guidance that HMRC issued on Fixed Protection in December 2010:

http://www.hmrc.gov.uk/pensionschemes/lifetime-allowance/savings.htm#3

Note that once Fixed Protection has been received, no further contributions can be paid by or on behalf of the member.

Flexible Drawdown
HMRC have also issued form APSS315 that is to be used for anyone who wants to take Flexible Drawdown. It is at:

http://www.hmrc.gov.uk/pensionschemes/apss315.pdf

Note that this form only applies to tax year 2011/12. A revised form will presumably be issued each tax year. The 2011/12 form needs to be returned to HMRC between 6th April 2012 and 31st January 2013.

In order to be eligible for Flexible Drawdown, someone must have at least £20,000 (gross) per annum of “secure pension income”. Only the following can count towards secure pension income:

1. Pension from a company pension scheme
2. A lifetime annuity
3. State pension

The above can be from either the UK or overseas, but if the income is non-sterling, currency will need very careful consideration.

Income which does not count towards secure pension income includes, for example:

1. Protected Rights (unless the individual is receiving income from a lifetime annuity set up with Protected Rights funds, in which case it can count towards the £20,000 secure pension income)
2. Drawdown Pension
3. Short term annuities

We remind you that once someone opts for Flexible Drawdown they must cease to accrue any further benefits in a defined contribution or cash benefit scheme. Additionally no further contributions can be paid by them or on their behalf to a defined contribution scheme eg a SIPP. In effect, any new pension savings made after Flexible Drawdown is taken will be liable to the annual allowance charge (ie income tax at their marginal rate of tax)

HMRC expect the IFA and the SIPP administrator and trustee to take proper steps to ensure that anyone taking Flexible Drawdown does indeed have adequate secure pension income. To that end we will require full evidence from the member that they do indeed have at least £20,000 secure pension income for their remaining lifetime.

Unregulated Collective Investment Schemes (UCIS)
Our August Newsletter focused on UCIS. We have now introduced a new form that we require the IFA to complete if they are promoting to their clients the investment of some MW SIPP assets into a UCIS. This effectively asks the IFA to confirm that they have carried out the appropriate due diligence on the investment and are promoting it to their clients in accordance with the FSA requirements. It acts as a helpful checklist for the IFA and helps ensure that the regulatory requirements are seen to be being met.

New contribution form
We have introduced a new form that requires completion in respect of any contributions paid to a new or an existing MW SIPP. This is to better clarify the source of funds. It also covers contributions that relate to “carry forward”. This is incorporated into the Application Form for new SIPPs, which is available online. For contributions to an existing MW SIPP please contact your usual MW Administrator who will email the form to you. 

Gilt Yield for Drawdown
The gilt yields to be used for drawdown calculations are:

We do not give financial advice and no comments here are intended as such. The above information is based on our understanding of the legislation governing pensions at the time of writing. Before taking any action you should consult a qualified financial and/or tax adviser. Levels, bases of and reliefs from taxation may be subject to change.

This Newsletter is intended for professional advisors only, not members of the general public

Read More Contributed Articles