An important change to the anti-forestalling measures

The anti-forestalling measures introduced and then updated last year, restricting higher rate income tax relief on pension contributions, have been updated again.

The Special Annual Allowance Charge (Protected Pension Input Amounts) Order 2010 extends protection against the special annual allowance charge in the event of three things occuring.

Firstly, where there is a change in pension provider on or after 22nd April 2009.

This means that individuals who change pension providers can continue to benefit from their protected contributions to the extent they were protected under the old pension arrangement. Contributions must recommence within three months for this to apply.

There are also provisions made within the Order for occupational pension scheme members where a change of pension scheme membership is made because the individual’s employer had entered into a re-organisation of its pension arrangements.

Secondly, for contributions which an individual or an individual’s employer was contractually committed to at 22nd April 2009 but which had not actually commenced on that date. This second measure could be helpful where a contractual agreement to make pension contributions when the anti-forestalling measures were introduced already existed but contributions were not actually paid.

For this to apply, the contractual offer needs to have been accepted in writing on or before 22nd April 2009. It means that the subsequent payment made is a ‘protected pension input’. The original contractual agreement needs to have stated the date by which the contribution would be made.

Thirdly, for certain lump sum contributions made on 22nd April 2009. This last point of the Order extends by a day the range of dates where protection for pension contributions paid less frequently than quarterly are made.

The Order can be read in full at http://www.hmrc.gov.uk/pensionschemes/allowance-charge.htm and HMRC will be updating their Registered Pension Scheme Manual in due course.

These anti-forestalling measures remain complex and we encourage anyone who believes they might get caught up in these interim rules to seek professional independent financial advice to ensure they are not subject to unnecessary tax charges.