Finance Act 2014 receives Royal Assent

Published by Mike Ferguson on

The Finance Act 2014 received Royal Assent on 17 July 2014, meaning that various issues applying to SIPP and SSAS members have now been finalised.

Individual Protection

Legislation has been passed to being in this new form of transitional protection from the Lifetime Allowance. 

  • Available to all members who had at least £1.25 million in their pension fund on 5 April 2014, but who do not hold Primary Protection
  • Protects the value of the member’s pension fund at 5 April 2014 up to an overall maximum of £1.5 million
  • Allows further contributions to be made for the member, but if they take the funds above the protected fund level which was set at 5 April 2014, they will be subject to a Lifetime Allowance Charge
  • Applications can be made to H M Revenue & Customs (“HMRC”) at any time from middle of August 2014 up to 5 April 2017

Benefit flexibility

When George Osborne announced that pension savers can have more freedom to drawdown their pensions from 6 April 2015, many retirees whose pensions were with insurers didn’t want to wait until then before they drew their retirement lump sum.  So some relaxations have been brought in to help these people who draw lump sums between 27 March 2014 and 5 April 2015:

  • An extension of the window for starting a pension once a lump sum has been drawn.  Previously, the lump sum could be drawn no more than six months before a pension (or drawdown plan) starts.  This has been extended to 6 October 2015.
  • Some ability to pay back that lump sum by 6 October 2015, if they decide not to start a pension by 6 October 2015.
  • Some ability to draw a lump sum from one pension plan and transfer the balance to another pension plan for payment of pension.
  • Preservation of higher lump sum rights for those with “scheme protected lump sums” who transfer their funds before 6 October 2015.  Previously, transfer caused the protection to be forfeit unless it was part of a group of transfers.

Applications for new scheme registrations

Government is concerned about new pension schemes being set up for the prime purpose of releasing money from pensions in a way that defrauds the pension saver and/or the Exchequer.  As such, new powers have been given to HMRC to assess new scheme registrations and scheme administrators.

  • HMRC has up to six months to consider registering new schemes, after which the Scheme Administrator has a right to appeal.
  • HMRC can request documents and information from the Scheme Administrator to consider whether they are suitable to act as a Scheme Administrator.
  • HMRC can request documents and information about a new scheme application from the Scheme Administrator.
  • HMRC can enter the premises of the Scheme Administrator and make reasonable requests to inspect documents to establish whether the Scheme Administrator is “fit and proper”, or to assist with a new scheme application.