Today the Inland Revenue published a package of amendments to the pensions simplification provisions in the Finance Act 2004. These new measures, expected to form part of this year's Finance Bill, include some significant changes as well as refinements of the simplified tax regime due to commence on 6 April 2006. Some are undoubtedly an outcome of ongoing liaison with the pensions industry.

Today's announcement does not give details of the new legislation: it only describes the Government's intentions. Nevertheless, it will have a significant impact on planning for simplification by providers. The new measures include:

• abandonment of the requirement for schemes with fewer than 50 members to provide scheme pensions through an insurance company (FA 04 Sch 28 para 2(1)).
• no 'double dipping' for TFC by individuals subject to the Pre-89 retirement regime who take TFC before A Day but defer pension: a second lump sum if vesting the pension after A Day will be prevented
• bereavement payments to fund funeral expenses may continue to be paid tax-free where the member retires before A Day and had the right to this benefit (and would have been offered it if they had joined on 10.12.03).
• transfers of pensions already in payment to be allowed (but not any alteration of the terms of the pension).
• Enhanced Protection to be lost on any transfer in post-A Day which is not a permitted transfer.
• individuals with Enhanced Protection to be prevented from taking amounts in excess of the LTA as a lump sum.
• TFC sums paid to the member before A day to be included in the check of aggregate lump sums paid against 25% of the LTA.
• providers of income drawdown arrangements to be given two years from A Day to value such arrangements for the purposes of determining the maximum income that may be drawn (instead of having to value all of them on A Day)
• a new rule to prevent employers obtaining tax relief on contributions to an unregistered scheme before the benefit is paid to the employee, by routing the payment through a registered scheme.
• a new benefit crystallisation event for individuals who reach age 75 with an unsecured pension fund: the amount crystallised will be the value of the fund less the amount crystallised when the fund was first created.
• a supplementary rule to confirm that the amount tested against the LTA is the gross value of the benefits before payment of any tax on the lifetime allowance charge.
• a raft of amendments pertaining to dependants' pensions, including
  • extending the definition of a dependant to cover persons married to the deceased member when the member first started to receive a pension, but divorced before the member died;
  • relaxing the definition to allow a pension in payment to a dependant child at A Day (or payable to such a child under a retirement arrangement of a person who has retired at A Day) to continue until the later of age 23 and ceasing full-time education or vocational training;
  • reversing the rule that excludes the cost of a dependant's annuity from the amount tested against the LTA and the maximum TFC, where a lifetime annuity provides for a dependant’s annuity on the member’s death;
  • prevention of a dependant’s scheme pension in excess of the member's pension;
  • relaxation of the requirement that a dependant’s pension in payment may not be reduced or stopped.
• RACs to be brought within PAYE from 6 April 2007.
• RACs, s.32 contracts and old code schemes: the Inland Revenue is unaware of the existence of many of these. The requirement for individual notification to Inland Revenue pre-6.4.6 is to be dropped; instead, compliance work to be allowed at provider level.