14 April 2022
- Engagement push by pension providers and schemes
- HMRC calls for pension schemes to migrate to its new online servicing platform
- GMP equalisation pension arrears – schemes should usually pay any interest element without income tax deduction
- Clarification of timescales for resolving the “net pay” issue
The Association of British Insurers (ABI) and the Pensions and Lifetime Savings Association (PLSA) have announced a new industry-wide campaign to run this autumn/winter intended “to boost people’s understanding and engagement with their pensions”. This “engagement season” campaign has been driven by research that shows that only 20% of people are confident that they are saving enough for retirement, engagement with pensions remains too low and over half of the public struggle to find their pension information.
The expectation is that the campaign will share tips on how individuals can identify who their pension providers are, make sure contact details are up to date, check how much they have saved towards retirement and prepare for pensions dashboards.
Fifteen providers and schemes (listed on the press release and representing approximately 41.5 million savers) have committed to support the campaign with at least £1m being pledged for it over the next three years.
The PLSA and ABI state that the campaign’s resources will be widely promoted and made freely available across the pensions industry, with the aim of encouraging savers (in automatic enrolment schemes, DB pensions, SIPPs and also those who have started withdrawing money from their pensions) to engage more with existing pensions communications, save more to achieve a higher income in retirement, review their retirement options, consider opportunities to consolidate and see how and where their pension is invested.
Pensions minister Guy Opperman has also welcomed the new campaign, which the PLSA and ABI say is designed to complement the work of the DWP.
Any campaign which succeeds in improving levels of member engagement can only be a good thing. It will also be interesting to see how this ABI/PLSA “engagement season” campaign interacts with DWP’s stated ambition of introducing a “statement season” (see Pensions Bulletin 2021/21).
HMRC’s April 2022 newsletter on its Managing Pension Schemes service, issued on 11 April 2022, coincides with the ability of scheme administrators from this date to migrate their “open” schemes to this new service. This is a necessary and potentially urgent action, because if scheme administrators or their authorised practitioners need to submit accounting for tax returns for the quarter ending 31 March 2022 (by the 15 May 2022 filing deadline), they can only do this on the new service. The same applies for any accounting for tax returns for any quarter from 1 April 2020 that have yet to be submitted. Pension scheme practitioners will, of course, also need to be enrolled on the new service before they can make such submissions.
As to the contents of the newsletter itself, much of it is not new, it having been contained in previous editions of the newsletter (see for example Pensions Bulletin 2022/08). Nevertheless, it is useful that HMRC has gathered it all together in one handy place.
Material covered includes the migration process, ensuring that those who need access to the new system do have access, scheme reporting and updating details on Pension Schemes Online.
Frustratingly, the newsletter makes clear that it continues not to be possible to migrate and then forget about the old Pension Schemes Online service as it remains needed in certain respects. However, we understand that the bulk reporting for accounting for tax returns and updated financial information features, which the newsletter states are not available on the new service, have also now been made available.
GMP equalisation pension arrears – schemes should usually pay any interest element without income tax deduction
The Association of Consulting Actuaries (as well as some other industry bodies) has published a statement, giving clarification provided by HMRC, on the general principles of the income tax treatment of interest paid by schemes on arrears payments of pension made as a result of a GMP equalisation exercise. The income tax position on the arrears themselves has already been set out in HMRC guidance.
The statement says that there has been some confusion, in terms of the tax due on such an interest element and the responsibilities (if any) of the scheme to deduct tax at source on such interest. HMRC has provided, by way of information given to individuals on its GMPe Working Group and with permission to share, that such interest counts (technically) as an interest payment made in respect of a late payment of pension instalments; such interest is likely to be “yearly interest” for tax purposes and so an obligation to withhold income tax is unlikely to arise (except in some specified cases); and that the interest is likely to fall under the “personal savings allowance” net.
The clarifications are very welcome given unclear existing guidance and the number of payments being made. This will be a matter for each pension scheme to take tax or legal advice on, but we assume the conclusion will be that schemes should not deduct tax at source on the interest payment relating to GMP equalisation arrears in most instances (by contrast to the arrears themselves).
Instead, members should be advised that they are responsible for accounting to HMRC for any tax due on this (and in many cases as the interest will be less than the member’s available personal savings allowance there will be no tax to pay).
We look forward to HMRC’s direct confirmation (the statement envisions that this might appear in an HMRC newsletter end May) and hope that the conclusions will be easy to extrapolate to other types of pension arrears situations.
Although the first top-up payments for low earners saving in a pension scheme using net-pay arrangements will – as previously reported – be based on pension contributions made in 2024/25, HM Treasury has clarified in written evidence to Parliament’s Work and Pensions Committee’s inquiry into savings for later life (see Pensions Bulletin 2021/53), that these top-ups will only be paid in 2026/27. This is because an individual’s eligibility for a top-up can only be established after a tax year ends, coupled with the complex changes required to HMRC’s IT systems to assess the entitlement to a top-up.
See Pensions Bulletin 2021/44 for full details of the solution that is being introduced.
Although the delay until top-up payments arising in a given tax year are received by individuals will be frustrating for low earners saving through net pay arrangements, this clarification may help manage their expectations.