UK: November Human Capital (Pensions) Monthly Update

Last Updated: 9 November 2007
Article by Jay Doraisamy

E-filing With HMRC Is Now Compulsory

HMRC has published Tax Simplification Newsletter 30 to coincide with the deadline for compulsory e-filing by pension scheme administrators which came into effect on October 16 2007. The newsletter provides details on the prescribed format for online filing, lists the forms that will become obsolete from 16 October 2007, contains guidance for schemes affected by the recent postal dispute, and explains who should notify HMRC of a scheme wind up in various different scenarios.

HMRC has also published an updated guide for scheme administrators using the Pensions Online Service. The guide explains the role of the scheme administrator, how to access and use the online service, and gives more detailed information on electronic filing.

To view the newsletter, go to The separate guide is available at

Pensions Aspects Of Pre-Budget Report

The Chancellor of the Exchequer released his Pre-Budget Report on 9 October, and it contained several provisions relating to pension schemes. The report includes changes to the State Second Pension (S2P) and contracting out, and confirms that legislation is to be introduced under the Finance Bill 2008 to ensure that the spreading of large pension contributions by employers cannot be avoided by routing them through a new company. It also makes various technical changes to the pensions aspects of the Finance Act 2004.

In relation to the inheritance of tax-relieved pension savings, Finance Bill 2008 will contain provisions to ensure that scheme pensions and lifetime annuities are used to provide an income for life and not as a means of diverting tax-relieved pension savings into inheritance. It does this by imposing unauthorised payments charges and, where appropriate, IHT charges. This makes the treatment of scheme pensions and lifetime annuities consistent with the treatment of alternatively secured pensions (ASPs).

HMRC publications and notes relating to the Pre-Budget report can be found at:

DWP Issues Response To Pensions Deregulatory Review

In its response to an independent Review of Pensions Regulation, the Government has unveiled its proposals for easing the burden of regulations on employers providing pension schemes. In particular, the Government is proposing to reduce the cap on the revaluation of deferred pensions so that the maximum increase required - between a member ceasing to build up any further rights in the scheme and their scheme retirement age - would be 2.5 % per annum. The current cap is 5 % per annum. The Government is also proposing to introduce a ‘statutory override’ to make it easier for scheme rules to be amended to take advantage of measures in the Pensions Act 2004 which reduced the cap for annual increases to pensions derived from benefits accrued since 2005 from 5 % to 2.5 %. A statutory override would also make it easier to make amendments to reflect any change to the cap used for the revaluation of deferred pensions.

The Government also intends to explore the following areas:

  • The circumstances in which an employer leaving a multi-employer scheme must make a payment to the scheme under the Employer Debt Regulations.
  • Principles-based legislation, starting with simpler rules on what schemes must tell members.
  • Employer concerns about the existing rules on surplus funds in defined benefit schemes. The full Government response to the Deregulatory Review’s findings is available at:

FAS Annuities Embargo - Exemption Forms Available From FAS

As mentioned in last month’s Update, the Government has introduced regulations which temporarily restrict the purchase of annuities in relation to pension schemes that qualify for the Financial Assistance Scheme (FAS), except in certain circumstances. One of those circumstances is where the trustees of a scheme had already entered into a binding commitment to purchase annuities before the embargo came into effect (it runs from 26 September 2007 for 9 months). All trustees who believe their scheme qualifies for one of the exemptions are being asked to submit a Notification of Exemption form to FAS by 15 November 2007 at the latest, even if the trustees subsequently decide not to annuitise at a later date. FAS has sent exemption forms and related guidance to affected schemes direct, but if you require further information or believe your scheme would be eligible for the exemption, contact the FAS operational unit on 0845 601 9941.

Changes To The Cross-Border Regime

The Government has published the Occupational Pension Schemes (EEA States) Regulations 2007 which amend various pieces of pension legislation to accommodate the recent extension of the EU Pensions (or "IORP") Directive to the wider European Economic Area (EEA). As a result, UK-based schemes will be able to accept sponsorship from employers based in an EEA State (Norway, Iceland and Liechtenstein) as well as from employers based within another EU member state. The regulations will come into force on 26 November 2007. The Government undertook a consultation on a draft of these regulations over the summer, and it has now published its response to that consultation. A copy is available from

In addition, the Government is consulting on the success of the 2005 Cross-border Regulations in implementing the cross-border provisions of the IORP Directive within the UK. The European Commission plan to carry out a review of the IORP Directive in early 2008, and the Government wants to be able to compare the Commission’s findings with the UK’s own experience of how well the cross-border provisions are working. The consultation paper seeks views on issues such as how well the approval and authorisation process is working in practice, what extra costs are involved for a scheme which operates cross-border and whether schemes have extended retirement provision in Europe as a result. The consultation closes on 4 December 2007, and a copy of the consultation paper is available at

Developments In Relation To Dispute Resolution Procedures

Long-awaited changes to the dispute resolution requirements of the Pensions Act 1995 are set to come into force in April next year. The Government has issued for consultation a set of draft regulations (the Occupational Pension Schemes (Internal Dispute Resolution Procedures Consequential and Miscellaneous Amendments) Regulations 2008), which will enable occupational pension schemes to simplify their internal dispute resolution procedures. The requirement for the current two-stage procedure with its strict time limits will be replaced by the option to retain the two-stage process or to move to a simpler one-stage process. Consultation on the draft regulations runs until 18 December 2007 and the consultation paper plus draft regulations are available at

In a separate move, the Pensions Regulator has issued its own consultation document on the ‘Dispute resolution – reasonable periods’ code of practice which it is proposing to implement alongside the new IDRP regulations referred to above. The amended version of the IDRP provisions in the Pensions Act 1995 requires trustees to issue decisions and to notify the applicant of the decision within a ‘reasonable period’. The draft code of practice sets out what the Regulator considers to be ‘reasonable’ in these circumstances. For example, it states that the Regulator generally expects disputes being considered by trustees to be decided, and the applicant notified of the decision, no more than four months after receipt of the application. Consultation on the draft code of practice runs until 19 December 2007, and a copy of the consultation paper is available at

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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