---

Pensions Bill

The amendment would introduce a power to make regulations so that any financial assistance scheme payments in arrears could be attributed to a tax year other than the one in which the payments were received. It would also allow a claim to be made for repayment of any income tax overpaid in respect of any arrears. The amendment is not necessary, but it may be helpful if I outline how existing tax law works in respect of FAS payments For income tax purposes, FAS payments are treated as pension income and, as such, are subject to existing income tax rules. The rules state that payments for a past period require income tax to be deducted initially through the PAYE system in the year in which they are received. However, the payments can subsequently be allocated to the years to which they relate and the tax adjusted accordingly, depending on the individual’s personal circumstances in those years. In other words, people can already obtain repayments from HMRC under existing rules. In practice, that means that, when FAS payments are made for a past period, the FAS operational unit will operate the existing tax code issued by HMRC. For the majority of members, this will be the basic rate tax of 20 per cent. For FAS recipients who think that they have paid too much tax, HMRC will, at their request, attribute their payment to the relevant tax years and reassess their tax. I hope that the Committee will see that this means that overall no one need pay more tax than they would have if the payments had been made in the years to which they relate. The Government have responded promptly and positively to concerns raised by Dr Ros Altmann of the Pensions Action Group in relation to the tax position of members who receive payments for a past period. We appreciate that tax matters can be complex, and, in liaison with HMRC and the Pensions Action Group, we have produced supporting information for FAS members who receive payments for a past period. In addition, we have arranged for a dedicated telephone helpline to be provided by the Pensions Advisory Service that will support members in understanding the position, given their other income and personal circumstances. I hope that it is clear that we understand the intention behind the amendment and that I have reassured the noble Lord that the clause is unnecessary. With regard to where we are on recalculating FAS assistance, since regulations came into force in early June the FAS operational unit has been recalculating assessments, now that assistance is payable at the 90 per cent level from normal retirement age. One thousand, two hundred and fifty-seven payments at the new rate were made in the June payroll, and we expect to have completed the reassessments by the end of August 2008. I hope that that is of assistance to the noble Lord.