Treasury admits annual allowance timing issue

A spokesman for the Treasury told schemeXpert.com this was a key reason for putting the lifetime allowance back to April 2012.

Lawyers and providers have criticised the demands placed on scheme managers and trustees to amend their benefit structures in fewer than six months.

And following last week’s announcement that the allowance is to be cut from £255,000 to £50,000 by April 6, the spokesman acknowledged the tight deadline, which occasioned the delay in the reduction of the lifetime allowance.

“We know there’s going to be lots of changes, so they’ve got more time for administration,” the Treasury spokesman said.

Lesley Browning, a partner at Norton Rose, claimed the change would require a big shift for schemes.

She said: “They’ll have to set up systems to deal with this, and to be cautious they’ll probably have to monitor a lot more members than you would originally think.

“It’s a burden on schemes – probably for employers more than trustees – to know how to communicate this to active members.”

Jane Beverley, head of research at Punter Southall, said the industry was still “waiting for more” in terms of the information requirements, which are to be published in draft form in early 2011.

“It is quite difficult to start implementing the changes until you have got those regulations, because you do not know exactly what you need, and in what format,” she added.

The government commentary on the consultation responses acknowledged concern about the cost of communication for “schemes that are smaller, or not able to benefit from simple, automated, systems changes”.

The decision was made not to align the pension input period (PIP) – the year within which pension savings are measured – with the tax year, to smooth the transition.

The proposals also give schemes six months from the end of the tax year to notify members if their benefits exceed the annual allowance, and to provide them with information covering the last three years, in case they have any benefits to carry forward.