Pension benefits for persons aged between 50 and 55

From HMRC:

Pension transfers for people aged 50 to 55

The Government intends to bring forward regulations to remove the unauthorised payments tax charge where an individual aged 50 and over but under 55 transfers their pension in payment to another pension provider. The Government intends to backdate the regulations to cover transfers made on or after 6 April 2010.

Background

The normal minimum pension age increased from age 50 to 55 from 6 April 2010. Since then, people can normally start receiving their pension payments without paying the unauthorised payment charge only once they have reached 55. Someone aged 50 and over but under 55 who started drawing their pension before 6 April 2010 can normally continue to draw it without paying the charge, even when they are not yet 55. However, we have become aware that unintentionally the legislation imposes the charge if such an individual transfers their pension before age 55 to a new provider.

The Regulations

The proposed regulations will apply to an individual who is aged 50 and over, but under 55, and who has already satisfied the normal minimum pension age test of 50 and over prior to 6 April 2010. The regulations will apply where:

• sums and assets of an income drawdown fund are transferred to a new income drawdown fund with another provider or,

• sums and assets underpinning an existing lifetime annuity are transferred to another provider to provide a new lifetime annuity or,

• sums and assets underpinning an existing short term annuity are transferred to another provider to provide a new short term annuity or,

• sums and assets underpinning an existing scheme pension are transferred to another registered pension scheme to provide a new scheme pension.

The regulations will ensure that there will be no unauthorised payment tax charge on these sums and assets and any payments of pension after the transfer.

Where, in advance of the regulations being made, scheme administrators act in accordance with this announcement, neither they nor members will need to pay the additional tax charges for failing to operate in accordance with the existing legislation.

We intend to publish draft regulations to cover these changes for comment as soon as possible. If you have any questions about this announcement, please contact the HMRC Pension Schemes Services helpline on 0845 600 2622 or e-mail pensions.policy@hmrc.gsi.gov.uk