NEWSLETTER: Reallocation of assets/Beware if setting up a new scheme to beat the end of the tax year/UK pensions for non-UK residents
Contributed by MW Pensions
13 March, 2014
Fixed Protection 2014
To clarify something we said in our February Newsletter anyone can apply for Fixed Protection 2014, not just those who have a pension pot in excess of £1.25. The forms are available online. Remember though that anyone who has Fixed Protection 2014 must NOT pay any pension contributions at all (or have any paid on their behalf) after 5th April 2014. If they do, they will lose that protection.
IMPORTANT: Delays in HMRC registration of new schemes
As we approach the end of the tax year, it is not uncommon for an Accountant or IFA to recommend that a company sets up a new SSAS before the tax year end in order to be able to make significant company pension contributions before 5th April, such contributions being eligible for Corporation tax relief.
However, we are aware that some practitioners are experiencing delays from HMRC with regard to them registering a newly set up scheme. As tax relievable contributions cannot be paid until the scheme has been registered, the current HMRC delays could jeopardise such arrangements. HMRC have confirmed that there are no plans to provide for tax relief to be available for contributions made after application but before a scheme had been registered. So beware until the HMRC delays have been sorted it may be safer for a SIPP to be used (as an existing SIPP scheme will already be registered with HMRC).
Reallocation of assets?
We receive an increasing number of queries asking about the ability to reallocate assets from one member to another. This is sometimes in the guise of future asset growth being allocated disproportionately (typically the family SIPP) and sometimes in the context of asset growth in excess of the Lifetime Allowance.
Whilst reallocation between members (typically within a SSAS) was allowed pre-April 2006 so long as certain criteria was met. HMRC specifically disallowed it from 6.4.06; For the techies, the relevant legislation is Section 172 & 172A of Finance Act 2004, which relate to assignment and surrender of benefits.
Whilst we can all understand why, in some circumstances, family members (typically) would like to reallocate pension assets often to the next generation - the legal advice and input we receive is virtually always that these schemes do not work and that any reallocation is likely to be treated by HMRC as an Unauthorised Payment - and as such will attract a penal tax charge.
We are surprised that, as far as we know, HMRC have yet to have a go at these types of schemes. Given the continued austerity and HMRCs need to raise every penny it can, we would not be surprised if they soon start to take action against these schemes. Maybe in the Budget?
In the meantime, if any advisors are tempted to use such a scheme for their clients, we strongly advise that the appropriate legal and tax advice is first taken.
Residency and eligibility for UK tax relief
From time to time we are asked about whether someone who is not resident in the UK can make (or have made on their behalf) tax relievable pension contributions. We cannot advise on this, and recommend that the individual concerned takes the relevant tax and residency/domicile advice.
HMRC have a full manual about residency and domicile and this is available at:
The registered pension Scheme manual also has a section about this:
Take advice from the right professionals is the right advice.
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
Authorised and Regulated by the Financial Services Authority
« Go Back to Articles