UK Announces Pension Tax Changes

by Robert Lee, Tax-News.com, London

07 July 2010

The UK tax authority, HM Revenue and Customs has announced that the government is to bring forward regulations to remove unauthorized payments tax charges for those in the 50-55 age group who transfer their pensions.

From April 6, 2010 the minimum pension age was increased from 50 to 55 and this allows those receiving their pension payments to avoid paying the unauthorized payment charge, provided they are at least aged 55.

Though the law intends that those aged between 50-55 who started to draw their pension before April 6, 2010 can do so without paying the charge, in practice the charge is imposed if a pension is transferred to another provider before age 55.

The new regulations will apply to someone aged over 50 but under 55 who has already satisfied the minimum pension age test of 50 and over prior to April 6, 2010. The regulations will provide that charges will not apply when:

• 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 pension scheme are transferred to another registered pension scheme to provide a new pension scheme

The new regulations will ensure that the unauthorized payment charges will not be imposed after such transfers.

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