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Response to pensions proposals

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The CIOT has commented on the draft Finance Bill 2022 legislation on pensions which will increase the normal minimum pension age (NMPA) from 55 to 57 from 6 April 2028 and extend the ‘Pension Scheme Pays’ deadlines for individuals to give notice to their scheme to pay their annual allowance charge for previous years, and for scheme administrators to provide information about a change to a member’s pension input amount.

On the proposed increase in the NMPA, the CIOT notes:

  • there appears to be no need to increase the NMPA and no obvious risk to the Exchequer in allowing workers to draw on their pensions from age 55;
  • there should be framework of protections for scheme members who already have a right to take their pension at a pre-existing pension age, although this will create complexity and additional work for scheme administrators – particularly where schemes accept transfers in and choose to ringfence protected rights;
  • as currently drafted, there is a potential gap in the legislation meaning that some pension scheme transfers before 6 April 2023 could potentially lose a pre-existing protected pension age, because the relevant provisions of the new legislation that otherwise would maintain that protection would only apply from that date onwards;
  • the legislation around protected NMPAs where members transfer both Defined Benefit and Defined Contribution rights to a new scheme needs to be clarified, to ensure any current restrictions do not present practical barriers to consolidation of pensions into larger schemes; and
  • the upper age limit at which individuals can make tax-relievable pension contributions should be increased from 75 to 77 (expressly in the pensions tax legislation) to ensure the age threshold remains ten years above state pension age.

On the proposed changes to pension scheme pays, the CIOT highlights that the six-year deadline for member scheme pays elections and the corresponding six-year deadline for administrators to notify a change to the pension input amount could present a timing problem. The CIOT notes that a very late notification by the administrator could effectively give the member very little time to respond (potentially less than one day), and it suggests that the administrator notification deadline should be brought forward.

Issue: 1546
Categories: News