No, this year's Finance Bill hasn't appeared yet; but we now have a good idea of most if not all of the measures affecting pensions which the Government plans to include. Today HMRC announced five points to be addressed in the Bill, all of which will come into effect from 6 April 2006 (possibly retrospectively).

1. Transitional protection and lump sum death benefits

The transitional protection rules will be extended so as to

1. allow insurance premiums to continue to be paid into policies paying lump sum death benefits, without invalidating enhanced protection, where the benefits payable under such policies remain those that would be payable under the terms of the policy as they stand at 5 April 2006; and
2. protect from the lifetime allowance tax charge the amount of stand-alone lump sum death benefits that would have been payable were the individual to have died immediately before the start of the new regime, in the event of death benefits being subsequently payable because of the death of the individual within the term of the policy.

2. Bridging Pensions

Some schemes provide additional pension to members until they start to receive their state pension, so that the pensioner's income remains broadly the same throughout retirement. Such 'bridging pensions' are permitted under FA 2004, as they are now. However, the FA 2004 rule says the reduction applied at SPA must be based on how much state pension the member actually receives, which presents significant administrative difficulties for schemes and their members.

The Bill will permit schemes to reduce the rate of scheme pension payable when a member reaches SPA, regardless of whether they have an actual entitlement to state pension. The maximum reduction in contracted-out schemes will be equivalent to the maximum annual amount of basic state pension, and twice that amount in other schemes.

3. Refund of excess contributions lump sum

This measure involves a technical amendment designed to remedy an undesired consequence of the way relief at source interacts with the limit on the refund of excess contributions lump sum. Where a member is given relief on their contributions through relief at source, the limit will exclude the amount given through relief at source on the excess contributions made by the member.

4. Migrant member relief (MMR)

The Bill will enable HMRC to regulate in favour of individuals who come to the UK as existing members of overseas pension schemes but who are then forced to join a new scheme instead - and thereby cease to comply with the condition for MMR that the individual must have been non-UK resident when they joined the overseas pension scheme. They are to be allowed to continue to get MMR on contributions to the new scheme.

5. Maximum Permitted Pension

The rules for calculating the value of a person’s protected pension rights are based in part on the "maximum permitted pension" to which that person is entitled pre-A Day. The statutory formula is based on the assumption that part of the pension can be commuted to provide a tax-free lump sum. The Finance Bill measure will amend it so that in schemes such as most public sector schemes which provide a separate lump sum, the value of the separate lump sum is reflected in the formula. (This measure was originally included in a package of Orders HMRC announced on 8 August 2005, but legal doubts arose about the power to make this particular Order.)

These five measures are in addition to those the Government announced on 5 December 2005 in an HMRC Technical Note [PDF] accompanying the Pre-Budget Report (PBR). Besides the notorious reclassification of residential property as a "prohibited asset" if held by a SIPP, SSAS or any other form of "self-directed pensions", this list of measures planned for inclusion in the Finance Bill 2006 included targeting the recycling of tax-free lump sums. Readers will recall the 'Meldrew moment' experienced by the entire industry when the details of that one were announced on 3 February 2006.

In addition, we must not forget that last August HMRC also announced its decision, after consultation with industry bodies, on the anomaly in the calculation of pension commencement lump sums (aka TFC) which arises where a scheme provides scheme pensions from money purchase arrangements, as an alternative to purchase of a lifetime annuity. The Finance Bill 2006 will provide in such cases for a lump sum equivalent to 25% of the funds used to provide the benefits.