The DWP has at last published the long-awaited* consultation on draft regulations to allow Self Invested Personal Pension Schemes (SIPPs) to hold protected rights, from October 2008. At present, only a few insurance-based SIPPs can offer this facility.
The effect of the current legislation is that a SIPP scheme cannot obtain a contracting-out certificate, and cannot therefore hold protected rights (unless, in a few cases, the provider is an insurer). The Government's view in the past has always been that protected rights should not be subject to the risk that can arise from self-investment especially as, until recently, the administration of SIPPs has been subject to low levels of regulation. The Government considers this restriction is unnecessary now that SIPPs are regulated by the FSA.
These new regs amend the Personal Pension Schemes (Appropriate Schemes) Regulations 1997 (SI 1997/470 - as amended, notably by SI 2006/147, which is to be revoked). The DWP has taken the simple and unusually radical approach of removing regs 2 and 3 of the Appropriate Scheme Regulations almost completely. Currently much that is in these regulations duplicates HMRC and FSA regulation on scheme registration and investment and the DWP thinks this is unnecessary.
The draft regs also make a minor amendment to contracting out legislation to remove the provision that permits a survivor's annuity to continue to be paid to any other person if the survivor dies during a five year guarantee period. This change is being made to bring DWP legislation into line with tax law which prevents the annuity being guaranteed for a minimum number of years, or being paid to someone other than a dependant. Amendments are required to The Personal and Occupational Pension Schemes (Protected Rights) Regulations 1996 (SI 1996 No. 1537) Regs 12(11)(c) and (we think) 4(9)(d).
The consultation runs until 29 February 2008.