Pensions Bulletin 2024/43
Pensions & benefits Policy & regulation Autumn budgetThis edition: Government responds to its consultation on raising standards in the tax advice market, Newsletter 164 reports on pensions tax changes in the Budget, Mineworkers Pension Scheme – Investment Reserve to be to utilised to uplift member benefits, PPF publishes response to section 143 valuation assumptions consultation, PSIG campaigns for tax leniency in scam cases and Shadow Cabinet announcements.
Government responds to its consultation on raising standards in the tax advice market
At the Autumn 2024 Budget the Government published a summary of responses to its consultation on raising standards in the tax advice market, that was launched at the March 2024 Budget (see Pensions Bulletin 2024/09). It also set out the action that it will now take.
Respondents were strongly in favour of requiring the registration of tax advisers who wish to interact with HMRC on behalf of their clients. As a result, from April 2026, all tax advisers who interact with HMRC on behalf of a client will have to register with HMRC before doing so. HMRC will apply checks to all tax practitioners who register. HMRC will publish a technical consultation on the legislation ahead of Budget 2025, and will communicate further detail to relevant stakeholders in due course.
Respondents were generally supportive of further Government intervention in the tax advice market in order to raise standards. However, they varied when it came to the exact action which should be taken. The Government is to continue to work closely with the sector to consider options to strengthen the regulatory framework for tax advisers.
More targeted reforms are also to be implemented as follows:
- The Government will consult on measures to enhance HMRC’s ability to act against a tax adviser where the adviser facilitates a taxpayer’s non-compliance. A consultation on specific proposals to enhance HMRC’s powers in this regard is to be published shortly, with a provisional intention to implement any changes from 2026 onwards.
- HMRC will introduce a requirement for tax advisers to obtain an Advanced Electronic Signature from their client, if they wish to submit an income tax repayment claim on their behalf.
Comment
HMRC has been looking into this area since at least 2020 and only now is it starting to arrive at some actions. However, it does seem to be arriving at proportionate and targeted solutions, which was not necessarily what could have been the outcome at the beginning of this exercise.
Newsletter 164 reports on pensions tax changes in the Budget
HMRC’s Pension Schemes Newsletter 164 published on 31 October 2024 concerns itself entirely with those announcements made in the Budget in connection with tax relieved pension savings. As such, it contains little that we have not already reported on in our Budget Special Pensions Bulletin, other than some points of detail.
For example, on the removal of an exclusion for the overseas transfer charge arising on transfer from registered pension schemes to a QROPS, although the Budget Day policy paper stated that this was to take effect from 30 October 2024, the newsletter clarifies that the exclusion being removed continues to apply to transfers requested before 30 October 2024, so long as the transfer is completed before 30 April 2025. It also points to new guidance on what HMRC would consider as being a transfer request.
The newsletter also sets out the remaining exclusions (subject to the member having sufficient overseas transfer allowance), being where the QROPS is:
- Established in the same country where the member is resident;
- An occupational pension scheme and the member is employed by its sponsor at the time of transfer;
- An overseas public service scheme which the member’s employer participates in at the time of transfer; or
- A pension scheme of an international organisation which the member is employed by at the time of transfer.
Separately, the proposed legislation on changes to the overseas transfer charge has been published.
Comment
Rather oddly, the newsletter concludes with an article, in relation to speculation about Budget changes, that points to the potential for some individuals to have taken unauthorised payments to reduce their tax bill or to reduce their exposure to changes that may come at a Budget. Odd because the Government showed no desire to quash rumours that may have caused a number of individuals to obtain early access to their retirement savings, whether unauthorised or authorised.
Mineworkers Pension Scheme – Investment Reserve to be utilised to uplift member benefits
On 31 October 2024, Energy Secretary Ed Miliband announced that the £1.5bn Investment Reserve Fund in the Mineworkers Pension Scheme, which was due to be returned to the Government in 2029, will now be transferred from this Reserve into the Scheme, enabling the Scheme’s trustees to provide a 32% boost to the annual pensions of 112,000 former mineworkers. This bonus is to be delivered into pensions pay packets from November 2024.
This delivers on a Labour Party manifesto commitment following a campaign by various organisations.
The surplus sharing agreement which gave rise to the Investment Reserve Fund is also to be reviewed “to ensure former miners and their families get a fairer deal in the years ahead“, with next steps set out in the coming months.
Comment
The Investment Reserve is the result of a 50/50 surplus sharing agreement dating from 1994 when the mining industry was privatised, under which 50% of the Scheme’s surplus is used to improve member benefits and 50% is placed into the Reserve, to be called on if necessary to ensure that member benefits do not fall in cash terms, and to be released to the Government if safe to do so. As part of this the Government guaranteed that pensions would not fall in cash terms. Over £4bn has found its way to the Government through the operation of this surplus sharing agreement.
PPF publishes response to section 143 valuation assumptions consultation
On 29 October 2024 the Pension Protection Fund published a full response to its March 2024 consultation on changes to section 143 valuation assumptions. This consultation had outlined proposals to allow marginally overfunded smaller schemes to use a bespoke discount rate for certain valuations during the assessment period.
Respondents were in general agreement about the proposals but said that care would be needed to avoid the risk of a scheme transferring to the PPF when it could have secured better benefits in the insurance or consolidator market.
In June 2024 the PPF announced that it would go ahead with these changes (see Pensions Bulletin 2024/22) for valuation effective dates on or after 31 May 2024, although it is only now that the consultation response has been published along with updated valuation and assumptions guidance documents. These are H9 (valuation) and B11 (assumptions) for section 143 valuations and D6 (valuation) for section 152 valuations.
PSIG campaigns for tax leniency in scam cases
The Pensions Scams Industry Group (PSIG) has launched a petition seeking a change in the treatment of historical victims of pension and investment fraud, who have faced “punitive” tax charges as well as a significant loss of retirement savings. The PSIG points out that many victims of fraudulent pension schemes have received tax bills of 55% on the total sum they put into the failed investments, plus interest.
The petition calls for HMRC to be given the power to waive or reduce tax charges in cases where losses were due to dishonesty or misconduct by a third party. The PSIG hopes to get 10,000 signatures as this will force a debate in Parliament on the matter.
Comment
We would support a move along these lines. There are genuine cases of severe hardship caused by the inflexibility of the legislation where pension scheme members have been the victims of fraud. Giving HMRC some discretion in this area is the humane thing to do.
Shadow Cabinet announcements
The new leader of His Majesty’s Official Opposition, Kemi Badenoch MP, has announced her Shadow Cabinet. Those most relevant to pensions are:
- Shadow Chancellor of the Exchequer: Mel Stride MP
- Shadow Chief Secretary to the Treasury: Richard Fuller MP
- Shadow Secretary of State for Work and Pensions: Helen Whately MP
A shadow for Emma Reynolds MP, Parliamentary Under-Secretary of State (Minister for Pensions), has not yet been announced.
Comment
It has been reported in the mainstream media that there are barely enough Conservative MPs to shadow every minister in the Government. Irrespective of political allegiances, legislation is normally better when there is effective and robust analysis of it in Parliament, so we hope that a shadow pensions minister is appointed in due course.
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