Pensions; Latest HMRC statistics on flexible payments from pensions and more

• Pension Schemes Newsletter 125 - October 2020
• Pensions dashboards delayed until April 2023
• Latest HMRC statistics on flexible payments from pensions - October 2020
• TPR: Criminal accountant forced to repay over a quarter of a million pounds defrauded from pension scheme
• DWP publishes study into DC pension saving behaviour

 

 

Pension Schemes Newsletter 125 - October 2020

(AF3, FA2, JO5, RO4, RO8)

HMRC Pension Schemes Newsletter 125 covers the following:

• temporary changes to pension processes as a result of coronavirus;
• re-employment in response to the coronavirus outbreak;
• managing Pension Schemes service – financial information;
• relief at source declaration – APSS590;
• pension flexibility statistics;
• signing into online services;
• registration statistics.

Issues of particular interest

Re-employment in response to the coronavirus outbreak.

The protected pension age easement was originally extended until 1 November 2020, the newsletter confirms that it won’t be extended further.

Pension flexibility statistics

The quarterly release of official statistics on flexible payments from pensions for the period 1 July 2020 to 30 September 2020 has now been published.

From 1 July 2020 to 30 September 2020 HMRC processed:

P55 = 7,267 f

P53Z = 3,552 forms

P50Z = 1,232 forms

Total value repaid: £39,439,262

Figures for the period 1 October 2020 to 31 December 2020 will be published in January 2021.

Signing into online services

A reminder that anyone that hasn’t logged into their Business Tax Account in the last three years will have their Government Gateway credentials deleted.

The newsletter confirms that this won’t remove any Pension Scheme Administrators from schemes, but will mean that they won’t be able to log in. To avoid this and ensure that Government Gateway credentials remain active, scheme administrators should log into their Business Tax Account as soon as possible.

Registration statistics

For the period 6 April 2020 to 30 September 2020 HMRC received in total 764 applications to register new pension schemes. This is a 4% reduction compared to applications received in the same period last year.

Of these applications, 66% have been registered and HMRC has currently refused registration for about 13% of applications. No decision has yet been made on the remainder.

Pensions dashboards delayed until April 2023

(AF3, FA2, JO5, RO4, RO8) 

The Pensions Dashboard Programme (PDP) has issued its second progress report. This sets out its six-phase plan for development of the dashboard with the aim that dashboards start to become available from 2023.

The five phases set out in the progress report are:

• Phase 0 (from 2019) Programme mobilisation (this phase is complete).
• Phase 1 (from 2020) Programme set up and planning.
• Phase 2 (from 2021) Develop and test.
• Phase 3 (from 2022) Voluntary onboarding and testing.
• Phase 4 (from 2023) Staged onboarding and dashboards to be available.
• Phase 5 Transition to business as usual.

The PDP state that the timeline has been published following extensive engagement with Government, regulators, industry, suppliers and consumer advocates.

Chris Curry, principal of the PDP at the Money and Pensions Service, stated: “While dashboards are a simple concept, the delivery of dashboards will be complex and is reliant on collaboration between the PDP and many other organisations across Government, regulators, dashboard providers, pension schemes and providers to complete actions at a specific time.”

In the 2016 Budget, the Government committed to launching the dashboard by 2019 and so the new timeline means there will be a delay of at least four years.

Latest HMRC statistics on flexible payments from pensions - October 2020

(AF3, FA2, JO5, RO4, RO8) 

The latest Official Statistics on flexible pension payments show a small (2%) decrease in the amount withdrawn from pensions flexibly, decreasing from £2.4 billion in Q3 2019 to £2.3 billion in Q3 2020.

The number of individuals making withdrawals saw an increase of 6% over the year, up to 347,000 compared to 327,000 in the same quarter of 2019.

The number of people making withdrawals typically peaks in Q2 due to the start of the tax year, before dropping in Q3. However, withdrawals have increased in Q3 this year. This may be due to the impact of the COVID-19 pandemic.

The average withdrawal in Q3 2020 fell 7% to £6,700, down from £7,200 in Q3 2019. The statistics have shown average withdrawal amounts consistently decreasing since reporting became mandatory in Q2 2016, usually with peaks in Q2 of every year. However, this year there has been no Q2 peak, again possibly due to the impact of COVID-19.

The decrease in average withdrawals suggests fewer people are paying unnecessary income tax on large withdrawals, however, advice is still essential to ensure money is taken in the most tax-efficient way. 

Even where careful planning is sought, due to the way withdrawals are made under the PAYE system too much tax is often deducted at source. Where this occurs clients can make a reclaim during the tax year.

To reclaim tax within the same tax year the following forms should be used:

• P55 to reclaim an overpayment of tax when funds have been flexibly accessed but the fund has not been extinguished.
• P50Z to reclaim an overpayment of tax when funds have been flexibly accessed and the fund extinguished and the client has also ceased to work or claim benefits.
• P53Z to reclaim an overpayment of tax when funds have been flexibly accessed and the fund extinguished.
• P53 to reclaim an overpayment of tax on a trivial commutation lump sum or small pension pot taken as a lump sum.

Please see ‘Taxation of flexible pension income’, which has more details and an example of how the PAYE system works with flexible pension withdrawals. 

TPR: Criminal accountant forced to repay over a quarter of a million pounds defrauded from pension scheme

(AF3, FA2, JO5, RO4, RO8)

The Pensions Regulator (TPR) has confirmed in a Press Release that William Bessent, a trustee and administrator for the Focusplay Retirement Benefit Scheme, has been ordered to pay back £274,733 that he stole from a workplace pension scheme.

He transferred £292,000 of savers’ money into businesses that were either struggling or new, that were run by himself, his family and a client.

On October 28 2020, a confiscation hearing was held at Preston Crown Court, where Judge Heather Lloyd instructed Mr. Bessent to repay £274,733 to the victims. £233,317 of this was to be returned to the Focusplay Retirement Benefit Scheme which equated to the difference between the amount stolen and amounts that had already been repaid. The amount must be repaid within a three-month period, or Mr. Bessent, who is an accountant based in Lancashire, will face an additional 30-month jail sentence. He was also ordered to pay the full amount of cash held across his bank accounts, which equated to £9,861, within seven days.

In March 2019, Mr. Bessent was sentenced to more than three years in jail, as a result of action taken by TPR. He pleaded guilty to numerous counts of fraud, making employer-related investments and acting as a director whilst disqualified (see Pensions related surveys and research to 8 March 2019).

TPR’s Director of Enforcement, Erica Carroll, said:

“Bessent held a position of trust which he abused for his own gain – stealing money meant for hardworking scheme members’ retirements. Today’s result shows TPR is determined that criminals such as Bessent are not only punished for their crimes but also do not benefit financially from their crimes. The money he stole will now be returned for the benefit of the scheme members he took it from. And, if he doesn’t pay up in three months, he faces extra jail time and will still have to return the money.”

DWP publishes study into DC pension saving behaviour

(AF3, FA2, JO5, RO4, RO8)

The DWP has commissioned NatCen Social Research to conduct a study to understand the behaviours of individuals with DC pension savings in respect of decumulation decisions, accessing support and retirement planning. The finding have been published in a report entitled: “Pension Freedoms: a qualitative research study of individuals' decumulation journeys”. The research relates to the DWP's objective of ensuring financial security for current and future pensioners. The report found little evidence of people considering the likely length of their retirement, their retirement income requirement or potential pension income until close to the point of retirement. People used the state pension age as a marker for when they might retire but were generally optimistic about their ability to continue working up to, and potentially past, that age. The report highlighted that each decision about whether or how to access a pension pot was a highly individual one, representing an interplay of circumstances, attitudes, perceived financial capability and how a person engaged with information, support or guidance.