Pensions  

HMRC creates pensions working group

HMRC creates pensions working group

The government has formed a working group to consider the pension tax issues as a result of guaranteed minimum pension (GMP) equalisation. 

The group, which is to be chaired by HMRC, is separate to that announced by the Pensions Administration Standards Association (PASA) in January. 

According to the latest HMRC pension scheme newsletter out on Friday (March 29) the group includes selected industry representatives and will work alongside other groups looking to address the wider issues arising from GMP equalisation. 

The first meeting of the working group will take place in April. 

Steve Webb, director of policy at Royal London, said: "HMRC are proceeding at a snail’s pace when it comes to resolving the uncertainties created by the Lloyds Bank ruling on GMPs before Christmas.    

"There are savers at risk today of facing huge tax bills because a GMP adjustment invalidates their protection against lifetime allowance tax charges. Yet all we are promised is a new working group which has not yet started to meet.

"HMRC needs to appreciate that savers need to know where they stand and treat it with far greater urgency."

Mr Webb added that a particular concern was whether a saver whose pension is increased as a result of GMP equalisation could find that they have inadvertently invalidated their fixed protection against lifetime allowance cuts. 

He outlined that in extreme cases this could mean that someone who initially thought they had locked into an LTA of £1.8m is now faced with one of £1.03m and potentially faces a six-figure tax bill.

Mr Webb said: "Whilst many schemes are yet to equalise for the effects of GMPs, some have already done so and others are planning to do so shortly so that they can be moved to buyout.  

"Until HMRC resolves this matter, savers will remain at risk of unexpected and huge tax bills."

The Pensions Administration Standards Association formed a group in January to help pension schemes develop and promote best practice following the High Court’s ruling on GMP equalisation in October.

Chaired by Geraldine Brassett of PASA, this group is made up of representatives from across the industry, including the administration, legal, advisory, actuarial, data and trustee sectors.

In a decision which could have widespread implications for hundreds of thousands of pensioners, the High Court ruled trustees must equalise benefits between women and men who have GMPs because of contracted out benefits.

Final salary scheme members who contracted out are set to receive millions of pounds in back payments following the ruling.