Currently, in order to be authorised under the Finance Act 2004, a pension must be secured not more than six months after (or 12 months before) the payment of any related lump sum.
HM Treasury has recognised that this may be seen as unfair to those who had taken a lump sum before the Budget on 27 March, but have yet to secure the pension. It has announced that the six-month period is to be extended to 18 months – this will allow individuals who have recently taken a lump sum from their DC arrangement but not yet secured a pension the opportunity to wait for the new rules to come in in April 2015. They will then be able to take advantage of the new flexibilities, if they wish to do so.
We anticipate that there will be an amendment to the Finance Bill, which is currently before Parliament, to achieve this.
Some scheme rules may have the six-month period written in. Unless the new legislation is overriding (and at this stage no detail has been published) trustees may need to exercise a discretion under the rules to allow a pension to be secured outside the six-month period or, in some cases, an amendment may be required.
The HM Treasury announcement can be found here.
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