Clause 150 - Payments by registered pension schemes

Finance Bill – in a Public Bill Committee at 2:30 pm on 8th June 2004.

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Photo of Ruth Kelly Ruth Kelly Financial Secretary, HM Treasury 2:30 pm, 8th June 2004

I beg to move amendment No. 297, in

clause 150, page 136, line 31, after second 'to' insert 'or in respect of'.

The amendment introduces a minor clarification. The clause introduces a rule on the payments that a registered pension scheme may make under the new simplified regime. It also introduces the rules for the borrowing that registered schemes may enter into. There will be a single, clear set of payment and borrowing rules that schemes must follow in order to stay within the parameters of the regime and obtain maximum tax relief for themselves, their members and sponsoring employers. They are called authorised payments, and they entirely meet the Government's

intention to provide generous, up-front relief for pension saving and to ensure that tax relief funds provide income for life in retirement.

To provide fairness and Exchequer protection and to encourage the use of tax relief funds for their intended purpose of providing an income for life in retirement, the regime provides for certain tax consequences to apply where payments are made which fall outside the authorised payments rule. They are called unauthorised payments, and we will come on to them in more detail after clause 161. In the context of the generous tax relief that will be available under the new regime, it is right that sanctions should apply where the rules are not complied with.

Unauthorised member payments not only cover payments that a scheme is not authorised to make, but treat as an unauthorised payment certain other transactions set out in clauses 161 to 163, which I shall turn to shortly. We need to ensure that not only are direct payments to a member treated as unauthorised member payments, but where such a payment or transaction can be undertaken in respect of a member that is caught by the unauthorised payment rules.

Clause 161 creates a tax charge when a member assigns his pension rights to someone else. We also want that to apply when the dependant of a member assigns a dependant's pension. The amendment enables the unauthorised payment charge in such circumstances, and I commend it to the Committee.

Amendment agreed to.

Clause 150, as amended, ordered to stand part of the Bill.