Pensions: what’s new this week - 18 May 2020
18 May 2020
Welcome to your weekly update from the Allen & Overy Pensions team, bringing you up to speed on all the latest legal and regulatory developments in the world of occupational pensions.
Covid-19 update: DC transfers
The Pensions Regulator (TPR) has updated its Covid-19 guidance to include guidance on transfers of DC benefits (from DC schemes and hybrid schemes). In particular, the new guidance states that:
- DC transfers are core financial transactions and should be prioritised during the Covid-19 crisis; member requests should be processed as usual. (This is in contrast to TPR’s position on DB transfers, where TPR has said that trustees of DB schemes may suspend CETV quotations and payments – you can read more about DB transfer guidance here and here) Trustees are reminded of pension scam risk and the need for due diligence.
- Transfers should be processed within a reasonable timeframe – TPR notes that delays may lead to a reduction in transfer values if there is a fall in investment values in that period.
- Trustees should continue to monitor all transfer activity and liaise with the administrator if there are any capacity issues.
- Trustees of hybrid schemes should consider how members with both DB and DC benefits would be affected if a temporary transfer suspension is applied to DB benefits, and are reminded to communicate with members about this in line with TPR’s earlier guidance on communicating with members.
In other news, the Coronavirus Job Retention Scheme has been extended until the end of October, with additional flexibility from August (when furloughed workers will be able to return to work part-time). Further details will be published in the coming weeks.
Tax legislation overrides conflicting guidance: HMRC v Sippchoice Ltd
The case involved an appeal by HMRC on the issue of whether transfers of assets to a self-invested pension plan could be considered ‘contributions paid’ under the Finance Act 2004. HMRC had originally refused a claim for income tax relief in relation to a transfer of shares and the First-Tier Tribunal allowed Sippchoice’s appeal against that decision, partly on the basis of PTM guidance.
HMRC appealed and the Upper Tribunal held that, on a proper construction of the legislation, the term ‘contributions paid’ is restricted to contributions of money in cash or other forms. It agreed that the natural reading of the relevant PTM guidance was consistent with Sippchoice’s case, but noted that HMRC’s manuals do not have the force of law (they merely set out HMRC’s interpretation of the law).
The decision is something of a cautionary tale, since the PTM is commonly used to clarify HMRC’s understanding and practice and to fill in detail not supplied in legislation. However, the UT noted that in this case there was no indication that Sippchoice had acted in reliance on the guidance or that it had a legitimate expectation that HMRC would not later resile from it.