The two additional lifetime allowance abolition regulations, which aim to resolve the technical faults in the initial regulations, came into force on 18 November 2024.

A summary of regulations is below however, as a result of them, trustees and scheme administrators may be considering whether to communicate an update to members about the changes (particularly the 2025 cut off for new enhancement factor claims or 2016 individual/fixed protection claims); what changes to administrative services are now required (and how to work with insurers if the scheme is in a buy-in period); and whether any scheme rule amendments are required.

The key changes in the Pensions (Abolition of Lifetime Allowance Charge etc) (No 2) Regulations 2024 include:

  • Clarifications on the calculation of the Lump Sum Death Benefit Allowance (LSDBA).
  • A requirement for administrators to report funds crystallised before and after 6 April 2024 to ensure correct deduction from LSDBA.
  • Changes in relation to specific protections, and for individuals who plan to transfer their pension savings to a QROPS.
  • A requirement for scheme managers to notify HMRC of the available Overseas Tax Allowance (OTA) when reporting a change of circumstances or making an onward transfer. 
  • TTFAC may now result in penalties when not issued within the required timeframe. Previously used LTA must also be included on a TTFAC, and individuals must give TTFAC copies to all pension schemes of which they are a member. 
  • Further reporting requirements relating to notification of allowances and protections.

And the key changes in the Pensions (Abolition of Lifetime Allowance Charge etc) (No 3) Regulations 2024 are:

  • Changes to the definition of the "Applicable Amount" as part of the calculation of the permitted maximum for a pension commencement lump sum. 
  • Amendments in relation to the calculations of certain figures, including certain protections. 
  • Amendments to ensure that a lump sum paid following an incorrect TTFAC is still an authorised payment, and any excess above the authorised amount is taxed at a member's marginal rate.

HMRC has also issued further guidance in relation to specific queries on the new regulations in its latest pension schemes newsletter. This latest edition included clarification on the transitional rules for those who already have a Transitional Tax-Free Amount Certificates (TTFAC); how pre-commencement pensions should be treated when applying for a TTFAC; guidance on Age 75 Disregard under Regulation 17(7); and clarification on a reporting requirement where lump sums were paid in reliance on an inaccurate TTFAC.

If you would like to discuss anything raised in this blog in more detail, please get in touch with a member of the pensions team or your usual Brodies contact.

Contributor

Juliet Bayne

Partner