Posted by John Lavery CEO WEA
The following public statement was presented by the Treasury last week as an update to the ongoing situation in regard to the unlawful act (now recognised) of transferring large numbers of the public sector into revised occupational pension schemes following the Hutton Review. For members of the Armed Forces this meant the migration from Armed Forces Pension Schemes (AFPS) 75 and 05 to AFPS 15.
On 25th March the Economic Secretary to the Treasury laid a Written Ministerial Statement before Parliament to provide an update on the progress the government is making to address the discrimination identified by the Court of Appeal in the 2015 reforms in some of the public service pension schemes.
The statement reiterated the government’s commitment to removing the discrimination across all public service pension schemes for all affected scheme members, not just for those who have lodged claims.
It also provided an update on the recent development of the policy proposals for achieving this. This is a complicated process which will take some time, but the government is committed to making progress on this despite the current situation with Covid-19.
The recent technical discussions held by pension schemes with member and employer representatives are now coming to an end. These have provided helpful insight which will be factored into the government’s policy making process. The government will be publishing more detailed proposals as part of a formal consultation later this year.
The WMS also notes the government may need to consider whether previous tax years from April 2015 onwards should be reopened to correct tax positions for those whose pension circumstances change as a result.
The government is currently finalising the pension policy proposals ahead of formal public consultation, these proposals will have the tax implications that the government is carefully considering. Ahead of confirmation of the policy position, we recommend that members keep their paperwork related to pension tax payments from 2015 onwards.
1. What was the purpose of technical discussions?
• The government wanted to provide key stakeholders, including member and employer representatives, an opportunity to share their initial thoughts at an earlier stage in the policy making process than usual.
• The government is now considering the initial views of stakeholders and will provide detailed proposals as part of a public consultation later this year.
2. What was the outcome of the technical discussions?
• The scheme level technical discussions provided the government with useful feedback on the outline proposals that had been developed so far. They were particularly helpful with providing scheme specific details.
• Feedback from these discussions will now be considered by the government and feed into the detailed proposals which will be published in a public consultation later this year.
3. When is the public consultation being published?
• The government is now developing more detailed proposals following the end of technical discussions, these will be the basis of the public consultation and so it is expected this will be ready to publish in the coming months.
4. Do I need to submit a claim to be eligible for the pension changes?
• No. All public service pension scheme members who were affected by the discrimination will be within scope of the changes made to schemes, whether they are deferred, pensioner or active members. They do not have to submit a legal claim.
5. Why aren’t you just returning everyone to their old schemes?
• Many individuals are better off in the reformed schemes, so we can’t just put everyone back into the old schemes, or they would lose out.
• Although it’s complicated, what we’re doing will mean that individuals can receive whichever scheme benefits are best for them.
6. What paperwork should scheme members retain?
• If a member’s pension circumstances change, then the government may need to consider whether previous tax years should be re-opened.
• As the pension policy proposals are still being finalised, it is not possible at this stage to say how they will interact with the tax system.
• Therefore, it would be helpful if people keep their paperwork related to tax from April 2015 onwards.
• This would include all self-assessment returns, P60s, the annual statements from your pension scheme administrator and documents relating to any other private pension schemes.
The guidance at para 6 of the Q&A is particularly pertinent if an individual was originally on AFPS 75 and has been subject to an annual allowance breach or was likely to. Equally the position on the financial settlement of any divorce that was agreed post 2015 and involved an individual’s pension may also have to be revisited depending on the final outcome. The WEA and our panel of professional advisors are ready to assist when the government’s final remedy is applied to the Armed Forces Schemes members. If you are concerned please do not hesitate to get in touch.
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