In pensions terms HMRC's new year has started off on a low key. The Social Security (Contributions) (Amendment) Regulations 2008 (SI 2008/133) was published yesterday, specifying the levels of the lower and upper earnings limits for primary and secondary Class 1 National Insurance Contributions (£90 and £770 per week respectively) and the primary and secondary thresholds for Class 1 NICs for 2008/09 (both set at £105 pw). It also provides for the equivalents of the primary and secondary thresholds where the earnings period is a month or a year (viz. £453 and £5,435).
The Lower Earnings Limit is linked by statute to the amount of basic state retirement pension, rounded down to the nearest pound. In line with the 2007 Budget announcement PN01, the upper earnings limit has been increased substantially, by £75 pw above indexation (and from April 2009, it is to be fully aligned with the higher rate threshold, ie the point at which taxpayers start to pay the higher rate of income tax). Both the primary and secondary thresholds are set at a level equivalent to the Income Tax Personal Allowance.
It appears the Government has begun to sense the impact of its innate urge to legislate. An unusual paragraph in the accompanying Explanatory Memorandum admits
Also yesterday the Government laid in draft The Social Security (Contributions) (Re-rating) Order 2008, which is an affirmative instrument (meaning that both Houses of Parliament have to approve it by resolution) that brings into force the annual up-rating of National Insurance rates and thresholds of Class 2, Class 3 and Class 4 NICs under Part 1 of the Social Security Contributions and Benefits Act 1992. This Order increases the rates of Class 2 (self employed) and Class 3 (voluntary) flat rate weekly contributions from £2.20 to £2.30 and from £7.80 to £8.10. The Small Earmings Exception, ie the amount of earnings below which an earner may be excepted from liability for Class 2 contributions, goes up from £4,635 to £4,825. The Order also increases, from £5,225 to £5,435 and from £34,840 to £40,040 respectively, the lower and upper limits of profits on which 8% Class 4 contributions are payable.
Meanwhile, the 31 January deadline looms; not only for self-assessment, but for Pension Scheme Administrators for submission of the annual Pension Scheme Return and the Event Report for the tax year 2006/07, the first year of the new pensions tax regime. HMRC has published checklists for completing these forms, online as they must be:
The Event Reports will be studied by HMRC among other reasons to discern the volume of unauthorised payments being generated, often unavoidably, under the new regime and range of circumstances involved.
The events that must be reported are contained in regulations (primarily the Provision of Information Regulations 2006 (SI 2006/567) as amended by SI 2006/1961), and are listed below. In many cases, the details of the recipient of a benefit or payment are required. The recipient could be the member, the employer or a third party (for example following the member's death). Some events could fall under more than one heading but, where they do, only one report is needed.
1 Unauthorised payments
2 Payments exceeding 50% of standard lifetime allowance
3 Early provision of benefits
4 Serious ill-health lump sum
5 Cessation of ill-health pension
6 Benefit crystallisation events and enhanced lifetime allowance or enhanced protection (EP)
7 Pension commencement lump sum
8 Pension commencement lump sum: primary and enhanced protection
8A Event Report filed on or after 11 August 2006: Stand-alone lump sum
9 Transfers to qualifying recognised overseas pension schemes (QROPS)
10 Event Report filed before 11 August 2006: Ability of a member to control scheme assets
10 Event Report filed on or after 11 August 2006: Investment-regulated pension scheme
11 Event Report filed before 11 August 2006: Changes in scheme rules
11 Event Report filed on or after 11 August 2006: Changes in scheme rules
12 Changes to rules of a scheme treated as more than one scheme pre-A Day
13 Event Report filed before 11 August 2006: Change in legal structure of scheme
13 Event Report filed on or after 11 August 2006: Change in legal structure of scheme
14 Change in number of members
15 Alternatively secured pension (ASP)
16 Transfer lump sum death benefit
17 Lump sum payment after the death of a member aged 75 or over
18 Event Report filed on or after 11 August 2006: Scheme chargeable payment
19 Event Report filed on or after 11 August 2006: Country or territory of establishment
20 Event Report filed on or after 11 August 2006: Occupational pension scheme
Earlier this month HMRC published a Guidance Note on The Employer-Financed Benefits (Excluded Benefits for Tax Purposes) Regulations 2007 (SI 2007/3537), on which we reported last month. "Excluded benefits" include continued provision of accommodation and related removal expenses, equipment for disabled former employees, welfare counselling, recreational benefits, and will writing and annual parties up to £150 per head. The regulations come into force on 8 January 2008, but in effect are backdated to 6 April 2006.
Finally, in what might have been one of his last formal actions before resigning today as Secretary of State for Work and Pensions, Peter Hain authorised publication of the draft annual GMP Increase Order. This Order specifies 3% as the percentage by which that part of any GMP in payment from a COSR scheme which is attributable to earnings factors for the tax years 1988/89 to 1996/97 is to be increased. Under s.109(3) PSA93, the percentage to be specified is the lesser of 3% and the actual RPI for the 12 months to 30 September 2007 – which was 3.9%.