2017 No INCOME TAX. The Registered Pension Schemes (Authorised Payments) (Amendment) Regulations 2017

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1 S T A T U T O R Y I N S T R U M E N T S 2017 No INCOME TAX The Registered Pension Schemes (Authorised Payments) (Amendment) Regulations 2017 Made *** Laid before the House of Commons *** Coming into force - - 6th April 2017 The Commissioners for Her Majesty s Revenue and Customs make the following Regulations in exercise of the powers conferred by section 164(1)(f) of the Finance Act 2004(a), and now exercisable by them(b). Citation and commencement 1. These Regulations may be cited as the Registered Pension Schemes (Authorised Payments) (Amendment) Regulations 2017 and come into force on 6th April Amendments to the Registered Pension Schemes (Authorised Payments) Regulations The Registered Pension Schemes (Authorised Payments) Regulations 2009(c) are amended as follows. 3. In regulation 1(2) (citation, commencement and effect) omit and before sub-paragraph (c) and after that sub-paragraph insert ; and (d) for payments of a description within Part 6, in relation to payments made on or after 6th April In regulation 2(5) (interpretation), before the definition of controlling director insert beneficiary means a dependant, nominee or successor of a member.. 5. After regulation 5A(d) insert (a) 2004 c. 12. Section 164 was amended by paragraphs 1 and 6 of Schedule 23 to the Finance Act 2006 (c. 25), paragraph 1 of Schedule 29 to the Finance Act 2008 (c. 9), section 75(2) of the Finance Act 2009 (c. 10), paragraphs 62 and 63 of Schedule 16 to the Finance Act 2011 (c. 11), paragraph 85 of Schedule 1 to the Taxation of Pensions Act 2014 (c. 30) and paragraph 3(1)(a) of Schedule 5 to the Finance Act 2016 (c. 24). (b) The functions of the Board of Inland Revenue were transferred to the Commissioners for Her Majesty s Revenue and Customs by section 5(1) of the Commissioners for Revenue and Customs Act 2005 (c. 11). Section 50(1) of that Act provides that in so far as it is appropriate in consequence of section 5, a reference in an enactment to the Commissioners of Inland Revenue (however expressed) shall be taken as a reference to the Commissioners for Her Majesty s Revenue and Customs. (c) S.I. 2009/1171, amended by S.I. 2012/1881; there are other amending instruments but none is relevant. (d) Regulations 5A and 20 inserted by S.I. 2012/1881.

2 5B. A payment by a registered pension scheme that is described in Part 6 of these Regulations is a payment of a prescribed description for the purposes of section 164(1)(f) of the Finance Act After regulation 20 insert PART 6 Pension Advice Allowance Payment 21. (1) A pension advice allowance payment is a payment (a) made by a registered pension scheme in respect of (i) a person who is or has been a member of that pension scheme, or (ii) a person who is a beneficiary of such a member, and (b) in respect of which the conditions in paragraph (2) are satisfied. (2) The conditions are that (a) the payment is made either for (i) retirement financial advice provided to the person, or (ii) the implementation of such advice; (b) the payment is requested in writing by the person; (c) the written request contains a declaration by the person that the conditions in subparagraphs (d) and (e) are satisfied; (d) no more than two pension advice allowance payments have been made in respect of the person; (e) no pension advice allowance payment has been made in respect of the person in the tax year in which the request is made; (f) the advice is regulated financial advice, provided by a financial advisor regulated and authorised by the Financial Conduct Authority to provide such advice; (g) the payment is made by the registered pension scheme directly to the financial advisor, and (h) the payment does not exceed Retirement financial advice means advice in respect of the person s financial position, including their pension arrangements and the use of their pension funds. Date 23. Regulated financial advice has the meaning given in Article 53 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001(a).. Name Name Two of the Commissioners for Her Majesty s Revenue and Customs EXPLANATORY NOTE (This note is not part of the Regulations) These Regulations amend the Registered Pension Schemes (Authorised Payments) Regulations 2009 (S.I. 2009/1171) ( the 2009 Regulations ), which provides for a variety of payments to be authorised payments when made by registered pension schemes to or in respect of its members. Such payments do not attract a tax change that applies when a registered pension scheme makes an unauthorised payment. (a) S.I. 2001/544. Relevant amending instruments are S.I. 2013/1881, 2016/392 2

3 Regulation 3 provides the date on which the amendments will take effect. Regulation 4 inserts a new definition into the 2009 Regulations. Regulations 5 inserts a new regulation 5B into the 2009 Regulations to provide that a pension advice allowance payment by a registered pension scheme will be an authorised payment for the purposes of the Finance Act 2004 (c. 12) if the conditions set out in the new regulation 21 of the 2009 Regulations are met. Regulation 6 inserts new regulations 21 and 22. New regulation 21 sets out what is a pension advice allowance payment and the conditions that must be met for the payment to be an authorised payment. New regulation 22 defines retirement financial advice. New regulation 23 defines regulated financial advice. 3

4 EXPLANATORY MEMORANDUM TO THE REGISTERED PENSION SCHEMES (AUTHORISED PAYMENTS) (AMENDMENT) REGULATIONS No. [XXXX] 1. Introduction 1.1 This explanatory memorandum has been prepared by Her Majesty s Revenue & Customs ( HMRC ) and is laid before the House of Commons by Command of Her Majesty. 1.2 This memorandum contains information for the Select Committee on Statutory Instruments. 2. Purpose of the instrument 2.1 This instrument amends the Registered Pension Schemes (Authorised Payments) Regulations 2009 (S.I. 2009/1171)(the 2009 Regulations ). 2.2 It introduces a new authorised payment and sets out the conditions that must be met in order for the payment to be authorised. 2.3 The new authorised payment will be known as the pension advice allowance payment. This payment may be made by registered pension schemes directly to a regulated financial advisor, for either the member of the scheme or a beneficiary of such a member. It allows the individual to use up to 500 from the pension pot to pay towards the cost of receiving retirement financial advice and/or the cost of implementing such advice. 2.4 They are able to use this facility no more than once in any one tax year, and no more than three times in total. 3. Matters of special interest to Parliament Matters of special interest to the Select Committee on Statutory Instruments 3.1 This instrument provides for a new authorised payment that will be available for registered pension scheme members and beneficiaries to use towards the cost of retirement financial advice that they receive from regulated financial advisors. 3.2 This instrument sets out the conditions that must be met in order for the payment to be an authorised payment. 3.3 If the conditions are not met and the payment is made, the recipient and the registered pension scheme may be liable for the unauthorised payments charge. Other matters of interest to the House of Commons 3.4 As this instrument is subject to negative resolution procedure and has not been prayed against, consideration as to whether there are other matters of interest to the House of Commons does not arise at this stage. TNA/EM/

5 4. Legislative Context 4.1 This instrument amends the 2009 Regulations and introduces a new authorised payment 4.2 Under section 160(1) of the Finance Act 2004 ( FA 2004 ), the only payments a registered pension scheme is authorised to make to a member or beneficiary from the pension pot are those payments specified in section 164 FA 2004, that is, authorised member payments. 4.3 Section 164(1)(f) confers powers on HMRC to prescribe by Regulations payments that will be authorised member payments. 4.4 This instrument sets out the conditions that must be met in order for the Pensions Advice Allowance payment to be an authorised payment. 4.5 This instrument will have effect from 6 April Extent and Territorial Application 5.1 The extent of this instrument is the United Kingdom. 5.2 The territorial application of this instrument is the United Kingdom. 6. European Convention on Human Rights 6.1 As the instrument is subject to negative resolution procedure and does not amend primary legislation, no statement is required. 7. Policy background What is being done and why 7.1 The Pensions Advice Allowance was recommended by the Financial Advice Market Review (FAMR), which found that high quality financial advice can have a significant impact on retirement income if received early. 7.2 The FAMR recognised that high quality financial advice in the UK is not always accessible or affordable for individuals with lower levels of wealth. 7.3 The Pensions Advice Allowance payment will allow consumers to access 500 of their defined contribution or hybrid arrangement pension pot tax free at any age, to redeem against the cost of retirement financial advice. This is intended to make retirement financial advice more affordable, and encourage consumers to consider taking advice to plan for their retirement. Consolidation 7.4 The Regulations will amend the 2009 Regulations. They will not be consolidated. 8. Consultation outcome 8.1 This instrument will be subject to a three week technical consultation. This technical consultation follows a consultation on the policy that took place from 30 August TNA/EM/

6 9. Guidance 9.1 Once the regulations are in force, guidance on this instrument will be included in the next available update of the HMRC Pensions Tax Manual. 10. Impact 10.1 The impact on business is expected to be negligible because there are only expected to be one-off costs in relation to familiarisation with the new rules and no on-going costs are expected. No impact on charities or voluntary bodies is foreseen There is no impact on the public sector An Impact Assessment is submitted with this memorandum and will be published alongside the Explanatory Memorandum on the legislation.gov.uk website. 11. Regulating small business 11.1 The legislation applies to activities that are undertaken by small businesses. 12. Monitoring & review 12.1 The measure will be monitored through communication with taxpayer groups including, for example, industry representatives on the Pension Forum. 13. Contact 13.1 Karen Bishop at HMRC, telephone: or can answer any queries regarding the instrument. TNA/EM/