New QROPS Regulations 2015

UK Budget 2014 – Consultation Response (July 2014)


As part of the 2014 Budget the UK government proposed sweeping changes to the UK pensions regime. The proposals were outlined in a consultation paper titled Freedom and Choice in Pensions published in March 2014. Details of the key proposals were set out in our last post. The consultation period for pensions ended on 11th June, 2014 and the UK government published its response to industry feedback on 21st July 2014.

UK Government Post Consultation Response

Private Sector Defined Benefit Pensions – The government has decided to continue to allow transfers from private sector Defined Benefit (‘DB’) pensions to Defined Contribution (‘DC’) pensions. However, any such transfer must be underpinned by independent advice from a suitably authorised adviser regulated by the UK’s Financial Conduct Authority (FCA). Trustees of Defined Benefit pensions will also be issued with new guidance concerning their powers to delay transfer payments and account for the scheme’s funding position when calculating a transfer value.

Unfunded Public Sector Defined Benefit Pensions – The government remains committed to banning transfers from unfunded public sector Defined Benefit pensions from April 2015. Transfers from funded public sector pensions will still be allowed and the advice safeguards applicable to private sector Defined Benefit pension transfers (outlined above) will apply.

Flexible Benefits from Defined Benefit Pensions
– As the proposals stand, any member of a Defined Benefit pension wishing to benefit from the flexible new regime would first have to transfer to a Defined Contribution pension. The government intends to consult on the feasibility of extending the new flexible regime to Defined Benefit pensions although they realise the complexity of this.

Statutory Override – The government will introduce a new statutory override which will allow all Defined Contribution schemes to offer the new flexible benefit regime.

Lump Sum Death Benefit Tax Charge – The government is clear that the current 55% tax rate on lump sum death benefits post drawdown is excessive. Detail on how this is to be changed will be issued as part of the Autumn Statement.

Tax Relieved Contributions – To prevent abuse of the new flexible system, the government will introduce a £10,000 cap on further UK tax relieved pension contributions where the member has already drawn a lump sum in excess of 25%. This will prevent individuals recycling benefit payments as new contributions to obtain further tax relief.

Guidance Guarantee – The government has pledged that free and impartial guidance will be made available to pension scheme members wishing to consider their options at the point of retirement. The consultation has confirmed that the guidance must come from independent sources in order to be effective. The delivery of the new guidance will be driven by partners such as The Pensions Advisory Service (TPAS) and the Money Advice Service (MAS) under the eye of the FCA.

Minimum Pension Age – This will increase from age 55 to age 57 in April 2028 as outlined in the original consultation paper.

What Next for QROPS in 2015?

As part of the implementation timetable the government will introduce a new Pensions Tax Bill with the draft legislation due for release in August 2014. It will also make amendments to the Pension Schemes Bill released on 26th June 2014. We will issue further guidance as soon as the new legislation is known.