On the go: The government is to review the taxation framework for defined benefit consolidators, which will occur alongside the work being done by the regulator in this area.
According to tax policies and consultations documentation released on Tuesday by the Treasury, changes are to be expected since this is an “innovative area”.
“It should not be assumed that the tax regime that currently applies to entities and transactions in the superfund structure or the pension schemes that have transferred to the Superfund will remain unchanged,” the document read.
The government’s approach will be informed by the features of the permanent regulatory regime, it added.
Two vehicles, The Pension SuperFund and Clara-Pensions, which are operating under an interim regime, are awaiting final approval from the Pensions Regulator.
In October, TPR published new guidance for DB schemes transferring into a commercial consolidation 'superfund', placing the burden of proof on trustees to show that their plan is in members' best interests.
The guidance specified that trustees of interested schemes should first demonstrate to the regulator how the move accords with a set of "gateway principles" before transferring into a superfund.
There are three gateway principles, based on the consultation into this area by the Department for Work and Pensions earlier in 2020.
First, transfers to superfunds should only be considered if the scheme “cannot afford to buy out now”. The second gateway principle is “if a scheme has no realistic prospect of buy-out in the foreseeable future, given potential employer cash contributions and the insolvency risk of the employer”.
Third, a transfer to the chosen superfund “must improve the likelihood of members receiving full benefits".
