On July 20, 2022, HM Treasury and HMRC published draft legislation to be included in the Finance Bill 2023, together with explanatory notes for each provision.
There are three pension-related measures, which:
- Extend pensions tax relief to cover individuals who contribute to an occupational scheme under net pay arrangements (rather than using a relief at source system) but whose total taxable income is below the personal allowance. The draft provisions address what has always been an injustice for some of the lowest paid workers by imposing on HMRC a duty to make top-up payments directly to those eligible members, as far as reasonably practicable. This measure is intended to take effect from April 6, 2024 and affect payments made in the tax year 2024/25.
- Ensure that periodic income payments made to pensioners under a collective money purchase scheme that is being wound up will continue to be treated as authorised payments, as will funds earmarked for drawdown pension following a transfer to another pension scheme. This change will take effect from April 6, 2023.
- Ensure that, where an individual has identified a pension that has been transferred into the Dormant Assets Scheme, a payment from an authorised reclaim fund will be treated for income tax purposes as if it were from the pension that was initially transferred. The draft legislation also provides that where an asset has been transferred to an authorised reclaim fund and its owner was alive at the time of the transfer but subsequently dies before the asset has been reclaimed, the owner will be treated for IHT purposes as still owning the original asset. This measure will take effect on Royal Assent.
The consultation on the measures closes on September 14, 2022.
