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Pensions

Answer

Prior to 6 April 2006 (““A day””) tax limits applied to the pensions that could be paid by occupational pension schemes that were approved by Her Majesty’s Revenue and Customs and from annuity contracts purchased by such pension schemes. Many pension schemes incorporated these tax limits into their rules and similarly many annuity contracts reflected the limits in their contract terms, but others simply relied upon the fact that such tax limits were imposed upon them by the tax rules. From A day these tax limits on pensions have been removed. This meant that some occupational pension schemes that did not have the previous tax limits specifically written into their rules potentially no longer had an upper ceiling on their pensions and faced unexpected increases in pension liabilities. The Registered Pension Schemes (Modification of Rules of Existing Schemes) Regulations 2006 (the ““modification regulations””) continue to apply the previous pension limits to such schemes and to annuity contracts which were not in payment on 5 April 2006, from A day until 6 April 2011 or such later time as HMRC may prescribe through regulations. The effect of this is to ensure that members continue to receive the same level of pension. During this period the scheme trustees or the annuity provider may, at any time, amend the rules of the pension scheme or the terms of the annuity contract so that the regulations cease to apply. The modification regulations ensure that the A day changes do not unexpectedly increase some pension payments and ensure that some occupational schemes and annuity contracts continue to pay members the same level of pensions. Therefore it is not necessary to monitor the level of the restrictions set out in those regulations. The consequences for the revenue received by the Exchequer arising from the modification regulations will depend upon the extent to which pension schemes and annuity contracts choose to retain the old benefit limits rather than adopt the more generous limits available under the post-A day tax rules.

Secondary information

Type

Written question

Reference

7362; 685 c82-3WA

Session

2005-06

Related items

Pensions
Monday, 26 June 2006
Written questions
House of Lords

Subjects

Workplace pensions Taxation

Legislation

Registered Pension Schemes (Modification of the Rules of Existing Schemes) Regulations 2006

Link

View this Written question on www.publications.parliament.uk