Pensions Tax Simplification Newsletter No. 17, published on 28 July 2006, clarifies several technical issues:

1. Provided all transfers are made at the same time, a member with enhanced protection (EP) can transfer to more than one receiving scheme without losing EP. In particular, this allows a transfer to a scheme that cannot accept protected rights whilst at the same time transferring the protected rights element to another scheme that is contracted out and so can accept those rights.
2. Where an individual starts taking benefits after achieving the normal minimum pension age of 50, but has not reached age 55 by the date this becomes the MPA ie 6 April 2010, payments made after this date will still be regarded as authorised.
3. Where medical evidence is required from a registered medical practitioner in order to commence an ill-health pension or to commute benefits for serious ill health, but the member is overseas, the certificate can be provided by someone with "equivalent overseas qualifications".
4. Where a member has reached age 75 but is untraceable, the Scheme Administrator can make a 'commercial judgement' as to whether a lifetime allowance charge should apply. In the event of any subsequent discovery that a lifetime allowance charge was due but was not returned, APSS would need to be satisfied that the judgement exercised by the Scheme Administrator was appropriate in the circumstances in order to operate the good faith discharge of tax liability.
5. An assignment of death benefits eg on transfer of a term assurance policy to a trust will not be treated as an unauthorised payment under FA04 s.172, unless the right to receive the benefits is a "prospective entitlement" of a dependant of the member. Where the benefits become payable at the discretion of trustees, no individual has anything more than a "mere expectancy": this does not amount to a prospective entitlement to benefit.
6. If given the scheme name in writing, APSS is willing to confirm whether an overseas pension scheme is a QROPS (RPSM 141.01.050) for the purposes of a transfer out.

In the wake of Royal Assent to the Finance Act 2006 on 19 July, HMRC published a number of statutory instruments:

The Registered Pension Schemes (Extension of Migrant Member Relief) Regulations 2006 (SI 2006/1957)

• allows migrant member relief to be retained on transfer from one overseas pension scheme to another, eg as part of a company takeover.

The Pension Schemes (Taxable Property Provisions) Regulations 2006 (SI 2006/1958)

• the method of valuing UK residential property shall also apply to non-UK residential property and tangible moveable assets. Also provides rules for taxing overseas assets held by non-UK resident registered pension schemes.

The Investment-regulated Pension Schemes (Exception of Tangible Moveable Property) Order 2006 (SI 2006/1959)

• excludes investment grade gold bullion and small items used for the administration of investment vehicles owned by investment-regulated registered pension schemes, such as computers, from being regarded as tangible moveable property.

The Pension Schemes (Application of UK Provisions to Relevant Non-UK Schemes) (Amendment) Regulations 2006 (SI 2006/1960)

• amendments to prevent a tax dodge whereby funds are transferred to a non UK scheme in order to purchase residential property and tangible moveable property.

The Registered Pension Schemes (Provision of Information) (Amendment) Regulations 2006 (SI 2006/1961)

• provide for scheme administrators to report certain further events:
  • when a stand-alone lump sum is paid (see also below on SI 2006/2004);
  • when a scheme starts or ceases to be an investment-regulated pension scheme;
  • when a tax charge arises on an investment-regulated pension scheme in relation to income or gains from residential property or tangible moveable property;
  • when there is a change in the country or territory in which a scheme is established; and
  • where a scheme becomes or ceases to be an occupational pension scheme.
• regarding recycling of lump sums, a member in receipt of the unauthorised payment is obliged to own up to the scheme administrator within thirty days, notifying the date it was made and the amount of the payment.
• if a scheme pension is provided from a money purchase arrangement, the individual has to tell the scheme paying the PCLS the amount of the fund used to provide the pension (so the lump sum can be calculated properly).
• overseas schemes whose members are caught by either the recycling rule or the prohibited assets rules are obliged to report to HMRC the unauthorised payments that arise as a consequence.

The Taxation of Pension Schemes (Transitional Provisions) (Amendment) Order 2006 (SI 2006/1962)

• income withdrawals in payment before A-Day will not trigger a benefit crystallisation event at age 75, unlike drawdown (USP) started after A-Day which triggers a BCE immediately and then a further BCE (No. 5A [FA 2006 Sch 23 para 30]) at age 75, if there is any USP fund still left.
• lump sum death benefits must be paid within two years of the date of death in order to be authorised payments. For deaths prior to A-Day, this time scale takes effect from the date at which the scheme administrator could be reasonably expected to know of the member's death.

The Taxation of Pension Schemes (Consequential Amendments) (No. 2) Order 2006 (SI 2006/1963)

• makes three consequential amendments to earlier primary legislation to ensure consistency with the Finance Act 2004.

All the above SIs came into force on 11 August 2006. The following one, however, was more urgent and came into force on 25 July:

The Taxation of Pension Schemes (Transitional Provisions) (Amendment No. 2) Order 2006 (SI 2006/2004) amends legislation regarding stand-alone lump sums to prevent an individual artificially increasing a protected entitlement. SI 2006/572 Art 25 covered members in schemes "approved" under the old tax rules who were allowed to take all their retirement benefits as TFC. It allowed schemes to pay these pre A-day lump sums worth 100% of rights, as long as they did not exceed the indexed value of the pre A-day amount.

This was defective in that it could have allowed some individuals to increase their protected rights to TFC and was also out of step with the normal lump sum rules that require that a lump sum can only be taken between ages 50 and 75. To plug the loopholes, this amending SI replaces Art 25 with five new articles (Art 25 and Arts 25A to 25D). Of these, Art 25 contains introductory material and defines the expression "stand-alone lump sum" as a lump sum which meets all the conditions set out in Art 25A and is made in one of the circumstances set out in Art 25B. Art 25C sets out the tax consequences if a stand-alone lump sum is paid, and Art 25D contains further provisions. These are explained in an HMRC Guidance Note.

The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2006 (SI 2006/1969) was laid on 29 June 2006 and subsequently has been approved by both Houses of Parliament. This Order amends the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544) to make establishing, operating or winding up a personal pension scheme (as well as establishing etc. a stakeholder pension scheme) a regulated activity for the purposes of the Act. Rights under a personal pension scheme become regulated investments under the Act. These provisions come into force on 6 April 2007. In particular they will bring all SIPP providers who currently are not regulated under the regulatory control of the FSA.