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Treatment of backdated annuity payments addressed

19 May 2014
Issue: 4452 / Categories: For Action , News , Admin , Investments , Pensions


HMRC are aware that some lifetime annuity contracts have been set up so that the provider agrees to backdate the periodic payments to the member to the date from which the member would have had the right to been paid a pension under the scheme rules.

The question arises as to whether a payment of arrears is authorised for the purposes of the pension tax rules in FA 2004, sch 28 para 3. One condition is that the amount of the annuity must not decrease.

The Revenue considers that contractual annuity income in respect of a period before the annuity was set up could be paid without breaching the requirement, provided the amount of the annuity paid in respect of the earlier period was at the same rate as future payments.

The tax department has confirmed that the guidance set out in the Registered Pension Schemes Manual at RPSM11102050 (meaning of “entitlement” for the purposes of the tax rules) is not affected by this clarification.

The entitlement to the lifetime annuity still arises when all necessary steps have been taken. The entitlement to the pension commencement lump sum still arises immediately before that time and can be paid up to six months before the date (or 12 months afterwards).

Arrears of lifetime annuity can be considered to be authorised pension payments under FA 2004, s 165 where the amount of the periodic payment is not decreased.

The information is set out in latest edition of HMRC’s pensions newsletter, which also covers:

  • Scheme registration: there has been an increase in telephone calls and post relating to registering a new pension scheme since the changes to the registration process took effect from 21 October 2013. Common subjects:
    • Registering a new pension scheme. HMRC say that chapter 6 of the online user guide provides guidance on this subject. They add that for all types of scheme, the scheme name cannot be the same as the administrator or establisher name. It should be the pension scheme name as shown on the establishing document.
    • Registering a death in service/group life assurance scheme. Paragraph 6.4 of the online user guide provides guidance on registering these types of schemes. The scheme name should always be the company name followed by either death in service or group life assurance scheme.
    • How long it will take for HMRC to make a decision whether to register a scheme? The department says this will depend on several factors, including how quickly the business responds to enquiries raised in respect of the application to register the scheme. The business can check the status of its application by entering the submission reference number on pension schemes online. The status will be shown under registration.
  • New email address: pension schemes services has set up a new email address for process related queries: HMRC say they will reply to enquiries within 15 working days.
Issue: 4452 / Categories: For Action , News , Admin , Investments , Pensions
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