The long-awaited amending legislation to permit all SIPPs to hold Protected Rights (SI 2008/1979) has been laid this afternoon, to come into force on 1 October 2008. Only minor changes of a purely technical nature have been made to the draft on which the DWP consulted (see previous Aries article).

In addition, reg 2 amends reg 12(11) of the Personal and Occupational Pension Schemes (Protected Rights) Regulations 1996 (SI 1996/1537), which applies where the member of a pension scheme dies before effect is given to that member’s protected rights. The amendment removes the provision which allowed payment of such a pension to or for someone who was not the spouse, civil partner or child of the member.

More significantly, the new regs amend the Personal Pension Schemes (Appropriate Schemes) Regulations 1997 (SI 1997/470) to change the circumstances in which a personal pension scheme can be an appropriate scheme. It must be registered with HMRC if it is to become an appropriate scheme. (If it meets this condition, the 1997 Regulations contain other conditions it may have to meet.).

HMRC has reminded SIPP providers wishing to hold Protected Rights that becoming an appropriate scheme entails obtaining a valid contracting-out certificate, via completion of form APSS101. Schemes can apply prior to the legislation coming into force, requesting an effective date of contracting-out of 1 October 2008. Completion notes are available, supplemented by the CA16A Manual which provides guidance on contracting out. HMRC is aware that both CA16A and APSS101 require amendment to reflect the changes in the legislation; this is being done, they say, but in the meantime the current form should be used.

As we noted earlier, though, the principal difficulty for SIPP providers lies not in securing the contracting-out certificate but in ensuring that, if they wish to allow ongoing contracting-out, they are able to issue FSA-compliant new business illustrations, ie including a Contracting-Out Comparison. Aries understands from the FSA that while the final proposals will not go to the Board before September, no material change to the April 2008 proposals (Quarterly Consultation Paper No. 16) are envisaged.