Today the Finance Bill, incorporating the new simplified pensions tax regime, received Royal Assent. The House of Lords passed the Bill on Tuesday afternoon, after considering a report from its Economic Affairs Committee. During the debate, Lord Haskel noted that although the Parliament Act restrained the Lords from amending the Finance Bill, it did not preclude the House from scrutinising it. Some criticism was directed by both himself and Lord Newby at the Treasury for allegedly having inhibited this scrutiny by refusing to answer questions fully.

In evidence to the Committee, the Inland Revenue confirmed that if someone with pre-A Day rights valued at more than £1.5m who had registered for Enhanced Protection (EP) accrued further benefits under a registered scheme (and thereby lost their right to EP), they could still opt for Primary Protection instead, provided they did so before 6 April 2009. The details are contained in a draft of The Pension Schemes (Enhanced Lifetime Allowance) Regulations 2004.

Trivial Pensions
It is arguably unfortunate that so much attention has been focussed on the complexities of the transitional provisions and so little time spent on the much wider problem of the availability of trivial commutation and the cost of paying very small pensions. The Lords shared the concern expressed by the NAPF in evidence to the Committee on this issue. The problem is that at present pensions can be looked at on a scheme by scheme basis, so that any trivial pension can be commuted. However, the new regime (Schedule 29 paras 7 - 9) - whilst raising the triviality threshold from a pension of £260 pa to a capital value of 1% of the Lifetime Allowance (ie initially £15,000) - requires all of a person's pension rights, crystallised and uncrystallised, under all arrangements, to be taken into account for this purpose. This is a very significant constraint upon the earlier proposal in paragraph A80 of the Inland Revenue's 'Condoc 2' of 10 December 2003, which proposed that it should not matter whether the member's total benefits across all pension schemes amounted to more than 1% of the LTA, provided no more than 1% was commuted on triviality grounds. This proposal was withdrawn following evidence of planned abuse along the lines that every individual should set up a bespoke 'triviality fund'.

As the Inland Revenue confined its reply to a re-statement of the Government's intention regarding 1%, as expressed in the Bill, the Economic Affairs Committee could do no more than call on the Revenue to discuss with industry representatives whether compliance costs could reasonably be reduced by a different approach to the commutation of trivial pensions.